-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WJiIBU1LqfZoSULQHZ0llFyc+rELhRrLyhXHlcD4yQM7v+6jfW0n2ntrw+GsgdO9 1H2+NHyd5Hkdh3I37/HbeA== 0000950131-96-004214.txt : 19960830 0000950131-96-004214.hdr.sgml : 19960830 ACCESSION NUMBER: 0000950131-96-004214 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960829 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BRINSON FUNDS INC CENTRAL INDEX KEY: 0000886244 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-06637 FILM NUMBER: 96622937 BUSINESS ADDRESS: STREET 1: 209 S LASALLE ST CITY: CHICAGO STATE: IL ZIP: 60604-1795 BUSINESS PHONE: 8001482430 MAIL ADDRESS: STREET 1: 209 S LASALLE ST CITY: CHICAGO STATE: IL ZIP: 60604-1795 N-30D 1 BRINSON PARTNERS AND SWISSKEY ANNUAL REPORTS ----------------------------- THE BRINSON FUNDS BRINSON U.S. BALANCED FUND BRINSON U.S. EQUITY FUND BRINSON U.S. BOND FUND ANNUAL REPORT JUNE 30, 1996 GLOBAL INSTITUTIONAL ASSET MANAGEMENT ----------------------------- CHICAGO.BASEL.LONDON.MELBOURNE.NEW YORK.PARIS.SINGAPORE.SYDNEY.TOKYO TRUSTEES AND OFFICERS - -------------------------------------------------------------------------------- LOGO TRUSTEES Walter E. Auch Frank K. Reilly, CFA Edward M. Roob OFFICERS Frank K. Reilly, CFA Carolyn M. Burke, CPA Chairman of the Board Assistant Secretary E. Thomas McFarlan Catherine E. Macrae President and Treasurer Assistant Secretary Thomas J. Digenan, CPA Debra L. Nichols Assistant Treasurer Assistant Secretary Bruce G. Leto Secretary ------------------------------------------------------------ 1 THE FUNDS' ADVISOR -- BRINSON PARTNERS, INC. - -------------------------------------------------------------------------------- LOGO Brinson Partners, Inc. is an institutional investment management firm structured around teams of investment specialists covering major world asset classes. We specialize in managing multiple asset portfolios that provide clients with the opportunity to participate in all major world asset classes. It is important that investment decisions, whether they pertain to a global portfolio or a single asset class portfolio, be made within the context of a global capital market perspective. Our coordinated application of investment strategies distinguishes Brinson Partners, Inc. as a leader in global investment management of institutional assets. We firmly believe that asset allocation is portfolio management at its highest and most important level. Performance is maximized through a comprehensive understanding of global investment markets and their interrelationships. Portfolio structure is tailored to specific client objectives and focused upon both risk and return considerations in the context of full long-term investment cycles. At Brinson Partners, Inc., our investment decisions are based on fundamental research, internally developed valuation systems and seasoned judgment. Our independent team approach allows for rapid responses to market changes, while providing each client with the benefit of our best talent and the flexibility to customize portfolios to meet unique requirements. ------------------------------------------------------------ 2 TABLE OF CONTENTS - -------------------------------------------------------------------------------- LOGO Shareholder Letter............................................................ 4 U.S. Economic and Market Highlights........................................... 5 U.S. Balanced Fund............................................................ 6 Schedule of Investments...................................................... 9 Financial Statements.........................................................12 Financial Highlights.........................................................15 U.S. Equity Fund..............................................................17 Schedule of Investments......................................................20 Financial Statements.........................................................22 Financial Highlights.........................................................25 U.S. Bond Fund................................................................27 Schedule of Investments......................................................29 Financial Statements.........................................................30 Financial Highlights.........................................................33 The Brinson Funds--Notes to Financial Statements..............................35 Report of Independent Auditors................................................38 Special Meeting of Shareholders...............................................39 ------------------------------------------------------------ 3 SHAREHOLDER LETTER - -------------------------------------------------------------------------------- LOGO August 19, 1996 Dear Shareholder: We appreciate the confidence you have placed in us and are pleased to present you with the June 30, 1996 Annual Report for the U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond Fund. This Report presents our current U.S. economic and market outlook, as well as the Funds' recent investment strategies and performance. To summarize this information: U.S. Balanced Fund For the period from December 31, 1994 (performance inception date) to June 30, 1996, the Fund has provided an annualized total return of 18.71%. In the first half of 1996, the Fund returned 3.05%. The Fund's market allocation has been characterized by an underweight in the U.S. equity market and an overweight to the U.S. bond market where return and risk characteristics are presently more attractive. U.S. Equity Fund For the period from February 28, 1994 (performance inception date) to June 30, 1996, the Fund provided an annualized total return of 20.23%. The Fund returned 11.23% in the first half of 1996. Fund strategy presently maintains a modest overweight in stocks with high book- to-price, earnings variability and financial leverage characteristics. In addition, the Fund is underweighted the foreign earnings exposure embedded in U.S. corporate earnings, particularly relative to the S&P 500. Current industry positions include relative overweights in capital goods, banks, transportation, insurance and autos/durables issues. The Fund remains underweighted in technology, utility, consumer non-durable and retail/apparel stocks. U.S. Bond Fund For the period from August 31, 1995 (performance inception date) to June 30, 1996, the Fund returned 3.60%. In the first half of 1996, the Fund returned - 1.79%. The strategic duration of the U.S. Bond Fund was lengthened from 1.20 to 1.25 times benchmark duration in late July. Since early March, intermediate and long-term U.S. interest rates have risen an additional fifty basis points. Market yields are now about 100 basis points above our equilibrium estimates. The increase in market yields reflected the worries of many bond market investors that stronger U.S. macroeconomic activity, tighter labor markets and higher inflation would lead to Federal Reserve tightening. We believe these risks are diminishing and that U.S. economic growth will slow in the second half of 1996 thus producing a more favorable environment for exposure to U.S. interest rates. We look forward to the challenges ahead and, as always, welcome your comments and suggestions. Sincerely, /s/ Gary P. Brinson Gary P. Brinson, CFA President and Chief Investment Officer Brinson Partners, Inc. ------------------------------------------------------------ 4 U.S. ECONOMIC AND MARKET HIGHLIGHTS - -------------------------------------------------------------------------------- LOGO Most indications point to continued modest growth this year, although with typical fluctuations. Recently, real GDP has grown at a rate well above market expectations, and recent employment data has also been stronger than expected. This has led to weakness in the bond market, despite little evidence for a causal link from employment to inflation. After showing relatively strong price pressure in the first four months of the year from increases in food and energy prices, the May and June CPI reports showed a slackening of inflationary pressure. Looking forward, temporary supply-demand imbalances should have no long-term impact on inflation. Fiscal policy issues, including the federal budget deficit, have effectively been put on hold during the run-up to the election. Despite the political posturing, continued reduction in the deficit is likely to persist in the long run. This is exemplified by the Administration's latest estimate of the current year's deficit: $117 billion, down from the March estimate of $146 billion. U.S. ENVIRONMENT MAJOR MARKETS Six Months Ended June 30, 1996 Total Return [CHART APPEARS HERE] U.S. Cash Equivalents 2.53 U.S. Bonds -1.25 U.S. Equities 10.27 SALOMON U.S. TREASURY BENCHMARK RETURNS Six Months Ended June 30, 1996 Total Return [CHART APPEARS HERE] Maturity (Years) 1 2.41 2 1.16 3 0.29 5 -1.76 10 -5.01 30 -9.34 TOP TEN INDUSTRY RETURNS RELATIVE TO S&P 500 Six Months Ended June 30, 1996 [CHART APPEARS HERE] 1. Oil Service 2. Cosmetics 3. Leisure, Luxury 4. Real Property 5. Retail (Other) 6. Apparel, Textiles 7. Motor Vehicles 8. Misc. Finance 9. Business Machines 10. Beverages Source: BARRA BOTTOM TEN INDUSTRY RETURNS RELATIVE TO S&P 500 Six Months Ended June 30, 1996 [CHART APPEARS HERE] 1. Electric Utilities 2. Liquor 3. Paper 4. Telephone, Telegraph 5. Aluminum 6. Other Insurance 7. Foreign Petroleum 8. Trucking, Freight 9. Iron & Steel 10. Coal & Uranium Source: BARRA ------------------------------------------------------------- 5 U.S. BALANCED FUND - -------------------------------------------------------------------------------- LOGO The U.S. Balanced Fund is an actively managed, diversified portfolio that provides integrated asset management across and within U.S. stocks, bonds and cash. The investment process is strategic in nature and is driven by deviations of market price from fundamental value. We believe this philosophy offers the greatest potential for achieving enhanced long-term returns, while controlling risk. The Brinson U.S. Balanced Fund has provided an annualized return of 18.71% since its inception on December 31, 1994. This compares with the corresponding 23.59% return of its benchmark, the U.S. Balanced Mutual Fund Index. For the year ended June 30, 1996, the Fund produced a total return of 13.52% compared to the benchmark return of 18.45%. In the first half of 1996, the Fund returned 3.05% while the benchmark returned 6.14%. The primary positive contributor to performance in the first half of 1996 was security selection within the equity component of the Fund. However, this was not large enough to overcome the negative impact of the underweight in equities and overweight in bonds. In the first six months of 1996, the bond market suffered losses, with the Salomon BIG Index showing a decline of 1.25%. Stronger than expected economic news and resurgent inflation fears caused an increase in volatility and resulted in yields moving back up. Equities were not adversely affected in the first half, as the Wilshire 5000 Index posted a 10.27% gain. Strategy within the Fund continues to focus on reducing the risk in the overpriced equity market. The increased level of the equity market drove prices to levels well in excess of fundamental value. The market had yet to reflect the less robust quarterly earnings comparisons that are now starting to emerge. Strategy within the equity portion of the Fund reflects an underweight in exposure to companies with foreign earnings, consistent with an underpriced U.S. dollar. The rise in yields in the first half of the year caused bonds to become more attractive, with yields in excess of those required as compensation for the risk of owning bonds. Our outlook is for inflation to remain relatively benign, which should produce attractive real returns for bondholders. Within the bond segment of the Fund, higher duration bonds are overweighted as the intermediate and long segments of the yield curve are more attractive than the short end. ------------------------------------------------------------ 6 U.S. BALANCED FUND - -------------------------------------------------------------------------------- TOTAL RETURN
6 months 1 year Annualized ended ended 12/31/94* 6/30/96 6/30/96 to 6/30/96 - -------------------------------------------------------------- BRINSON U.S. BALANCED FUND 3.05% 13.52% 18.71% - -------------------------------------------------------------- U.S. Balanced Mutual Fund Index** 6.14 18.45 23.59 - --------------------------------------------------------------
*Performance inception date of the Brinson U.S. Balanced Fund. **An un-managed index compiled by the Advisor, constructed as follows: 65% Wilshire 5000 Index and 35% Salomon Brothers Broad Investment Grade Bond Index. Total return includes reinvestment of all capital gain and income distributions. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $100,000 This chart shows the growth adjustment has been made for in the value of an any income taxes payable by investment in the Brinson shareholders on income U.S. Balanced Fund and the dividends and capital gain U.S. Balanced Mutual Fund distributions. Past Index if you had invested performance is no guarantee $100,000 on December 31, of future results. Share 1994, and had reinvested all price and return will vary your income dividends and with market conditions; capital gain distributions investors may realize a gain through June 30, 1996. No or loss upon redemption. BRINSON U.S. BALANCED FUND VS. U.S. BALANCED MUTUAL FUND INDEX Wealth Value with Dividends Reinvested [CHART APPEARS HERE] 12/31/94 6/30/96 -------- -------- Brinson U.S. Balanced Fund $100,000 $129,312 U.S. Balanced Mutual Fund Index $100,000 $137,403 Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. LOGO ------------------------------------------------------------ 7 U.S. BALANCED FUND - -------------------------------------------------------------------------------- LOGO INDUSTRY DIVERSIFICATION As a Percent of Net Assets As of June 30, 1996 - ------------------------------------------------------------------------------- U.S. EQUITIES Basic Industries Chemicals.............................................................. 0.34% Housing/Paper.......................................................... 1.55 Metals................................................................. 0.15 ----- 2.04 Capital Investment Capital Goods.......................................................... 3.87 Technology............................................................. 1.74 ----- 5.61 Consumer Autos/Durables......................................................... 0.44 Discretionary.......................................................... 3.07 Health: Drugs.......................................................... 3.17 Health: Non-Drugs...................................................... 1.60 Non-Durables........................................................... 4.55 Retail/Apparel......................................................... 1.87 ----- 14.70 Energy.................................................................. 2.24 Financial Banks.................................................................. 4.74 Non-Banks.............................................................. 4.27 ----- 9.01
Services................................................................ 2.78% Transportation.......................................................... 2.09 Utilities............................................................... 1.70 Miscellaneous........................................................... 1.18 ------ Total U.S. Equities.................................................. 41.35* ------ U.S. BONDS Corporate Bonds Asset-Backed........................................................... 1.83 CMO.................................................................... 0.53 Consumer............................................................... 1.32 Financial.............................................................. 2.22 Industrial............................................................. 0.52 Telecommunications..................................................... 0.69 ------ 7.11 International Dollar Bonds.............................................. 4.03 U.S. Government Agencies................................................ 17.87 U.S. Government Obligations............................................. 26.73 ------ Total U.S. Bonds..................................................... 55.74* ------ SHORT-TERM INVESTMENTS.................................................. 6.76* ------ TOTAL INVESTMENTS.................................................... 103.85 LIABILITIES, LESS CASH AND OTHER ASSETS.................................................. (3.85) ------ NET ASSETS.............................................................. 100.00% ======
*The Fund held a long position in U.S. Treasury futures on June 30, 1996 which increased U.S. bond exposure from 55.74% to 59.30%. The Fund also held a short position in stock index futures which reduced U.S. equity exposure from 41.35% to 34.54%. These two adjustments result in a net increase in the Fund's exposure to Short-Term Investments from 6.76% to 10.01%. ASSET ALLOCATION As of June 30, 1996
CURRENT BENCHMARK STRATEGY - ------------------------------------ U.S. Equity 65% 35% U.S. Bonds 35 60 Cash Equivalents 0 5 - ------------------------------------ 100% 100%
TOP TEN U.S. EQUITY HOLDINGS As of June 30, 1996
PERCENT OF NET ASSETS - -------------------------------------------- 1. Citicorp 2.16% 2. Lockheed Martin Corp. 2.11 3. Chase Manhattan Corp. 1.80 4. Burlington Northern Santa Fe 1.64 5. Enron Corp. 1.60 6. Avon Products, Inc. 1.44 7. Schering Plough Corp. 1.31 8. Kimberly-Clark Corp. 1.25 9. Mattel, Inc. 1.18 10. Aon Corp. 1.12 - --------------------------------------------
------------------------------------------------------------ - --------------- 8 U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - --------------------------------------------------------------------------------
SHARES VALUE ------- ------------ U.S. Equities -- 41.35% Aetna Life & Casualty Co................................... 24,900 $ 1,780,350 Allergan, Inc.............................................. 41,500 1,628,875 Allstate Corp.............................................. 23,600 1,076,750 Alza Corp. (b)............................................. 40,500 1,108,688 American Mobile Satellite Corp., Inc. (b).................. 4,300 66,650 Aon Corp................................................... 50,500 2,562,875 Automatic Data Processing, Inc............................. 47,400 1,830,825 Avon Products, Inc......................................... 72,800 3,285,100 Bard (C.R.), Inc........................................... 25,100 853,400 Beckman Instruments, Inc................................... 16,200 615,600 Biogen, Inc. (b)........................................... 3,800 208,525 Birmingham Steel Corp...................................... 16,300 266,913 Boeing Co.................................................. 10,700 932,238 Boston Technology, Inc. (b)................................ 16,200 273,375 Brinker International, Inc. (b)............................ 11,700 175,500 Burlington Northern Santa Fe............................... 46,300 3,744,513 Centerior Energy Co........................................ 34,000 250,750 Chase Manhattan Corp....................................... 58,400 4,124,500 CIGNA Corp................................................. 20,100 2,369,288 Citicorp................................................... 59,900 4,949,237 CMS Energy Corp............................................ 44,200 1,364,675 Coca Cola Enterprises, Inc................................. 38,800 1,343,450 Comerica, Inc.............................................. 11,100 495,337 Comverse Technology, Inc. (b).............................. 12,400 378,200 Cooper Cameron Corp. (b)................................... 5,730 250,687 Corning, Inc............................................... 63,200 2,425,300 Dial Corp.................................................. 33,100 947,488 EMC Corp./Mass (b)......................................... 46,000 856,750 Enron Corp................................................. 89,300 3,650,138 Entergy Corp............................................... 12,300 349,012 Federal Express Corp. (b).................................. 4,800 393,600 Federated Department Stores (b)............................ 43,100 1,470,787 FileNet Corp. (b).......................................... 6,200 226,300 First Data Corp............................................ 12,129 965,772 Food Lion, Inc. Class A.................................... 57,500 456,406 Ford Motor Co.............................................. 40,800 1,320,900 Forest Laboratories, Inc. (b).............................. 27,500 1,062,187 Gannett Co., Inc........................................... 27,000 1,910,250 General Instrument Corp. (b)............................... 64,600 1,865,325 Genzyme Corp. (b).......................................... 5,300 266,325 Goodyear Tire & Rubber Co.................................. 48,500 2,340,125 Health Care and Retirement Corp. (b)....................... 21,750 516,563 Honeywell, Inc............................................. 32,700 1,782,150 Inland Steel Industries, Inc............................... 10,400 204,100 Interpublic Group of Companies, Inc........................ 20,100 942,187 James River Corp. of Virginia.............................. 23,300 614,537 Kimberly-Clark Corp........................................ 37,000 2,858,250 Kroger Co. (b)............................................. 17,000 671,500 Lockheed Martin Corp....................................... 57,300 4,813,200 Lyondell Petrochemical Co.................................. 44,300 1,068,737 Magna Group, Inc........................................... 7,200 172,800 Manor Care, Inc............................................ 26,500 1,043,437 Mattel, Inc................................................ 94,250 2,697,906
SHARES VALUE ---------- ------------ Melville Corp.......................................... 55,000 $ 2,227,500 Nabisco Holdings Corp. Class A......................... 5,200 183,950 National Semiconductor Corp. (b)....................... 47,200 731,600 Nextel Communications, Inc. Class A (b)................ 40,700 775,844 Old Republic International Corp........................ 23,450 507,106 Owens Illinois, Inc. (b)............................... 36,200 579,200 Pentair, Inc........................................... 19,000 570,000 Pfizer, Inc............................................ 2,700 192,713 Philip Morris Companies, Inc........................... 8,600 894,400 RJR Nabisco Convertible Preferred "C".................. 131,600 855,400 RJR Nabisco Holdings Corp.............................. 13,040 404,240 Schering Plough Corp................................... 47,700 2,993,175 Seagate Technology, Inc. (b)........................... 12,600 567,000 Sprint Corp............................................ 31,600 1,327,200 State Street Boston Corp............................... 9,600 489,600 Timken Co.............................................. 11,300 437,875 Transamerica Corp...................................... 11,300 923,775 Tyson Foods, Inc. Class A.............................. 33,600 919,800 Ultramar Corp.......................................... 17,700 513,300 US Bancorp............................................. 27,600 997,050 USF&G Corp............................................. 36,700 600,963 Westvaco Corp.......................................... 9,650 288,294 Whitman Corp........................................... 17,000 410,125 WMX Technologies, Inc.................................. 51,400 1,683,350 York International Corp................................ 5,600 289,800 360 Communications Co. (b)............................. 14,100 338,400 ------------ Total U.S. Equities (Cost $77,173,388)................. 94,529,993 ------------ FACE AMOUNT VALUE ---------- ------------ Bonds -- 55.74% U.S. CORPORATE BONDS -- 7.11% American Express Credit Account Master Trust 96-1A 6.800%, due 12/15/03.................................. $1,280,000 $ 1,285,504 Bell South Corp. 0.000%, due 12/15/15.................. 3,175,000 635,010 Chrysler Financial Corp. MTN 6.500%, due 08/21/97...... 1,000,000 1,002,990 Dayton Hudson Credit Card 95-1 6.100%, due 09/25/98.... 2,000,000 1,990,960 Ford Motor Credit Corp. MTN 5.370%, due 09/08/98....... 945,000 922,462 GE Capital Mtg. Services, Inc. 94-10A 6.500%, due 03/25/24.............................................. 1,512,666 1,204,566 GMAC MTN 6.750%, due 06/10/02.......................... 1,000,000 983,670 Grace W.R. & Co. 8.000%, due 08/15/04.................. 1,150,000 1,195,000 Nationwide CSN Trust 9.875%, due 02/15/25.............. 1,000,000 1,099,173 News America Corp. 7.750%, due 01/20/24................ 1,000,000 928,262 Standard Credit Card Trust 94-1A 4.650%, due 02/07/97.. 2,000,000 1,985,140 TCI Communication 6.820%, due 09/15/10................. 2,100,000 2,092,119
- -------------------------------------------------------------------------------- 9 U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ---------- ----------- Time Warner Entertainment, Inc. 9.150%, due 02/01/23................................... $ 430,000 $ 444,916 8.375%, due 03/15/23................................... 500,000 485,548 ----------- 16,255,320 ----------- INTERNATIONAL DOLLAR BONDS--4.03% Bangkok Bank Public Co. Ltd. 7.250%, due 09/15/05....... 2,100,000 2,028,810 Hanson PLC Notes 6.750%, due 09/15/05................... 1,000,000 958,955 International Bank for Reconstruction & Development 6.375%, due 07/21/05................................... 1,500,000 1,439,499 Petroliam Nasional 7.125%, due 08/15/05................. 1,500,000 1,479,639 Republic of Italy 6.875%, due 09/27/23.................. 1,500,000 1,348,594 S.E. Banken 144-A 6.625%, due 03/12/01.................. 2,000,000 1,948,200 ----------- 9,203,697 ----------- U.S. GOVERNMENT AGENCIES--17.87% Federal Home Loan Mortgage Corp. 8.250%, due 08/15/23... 1,695,000 1,750,617 Federal Home Loan Mortgage Corp. Gold 8.000%, due 05/01/23................................... 928,443 936,850 9.000%, due 03/01/24................................... 467,845 491,060 9.500%, due 04/01/25................................... 1,530,375 1,625,538 Federal National Mortgage Association 7.000%, due 03/01/03................................... 2,055,000 2,047,294 6.000%, due 12/25/08................................... 2,600,000 2,295,514 6.700%, due 08/25/20................................... 3,860,000 3,619,599 8.000%, due 06/01/24................................... 319,102 321,593 8.000%, due 07/01/24................................... 18,032 18,173 8.000%, due 08/01/24................................... 42,378 42,709 8.000%, due 11/01/24................................... 23,832 24,018 8.000%, due 03/01/25................................... 206,820 208,434 8.000%, due 04/01/25................................... 676,076 681,353 7.500%, due 05/01/25................................... 1,561,833 1,541,810 8.000%, due 05/01/25................................... 1,818,141 1,832,330 8.000%, due 06/01/25................................... 1,540,977 1,553,004 6.000%, due 03/01/26................................... 1,850,000 1,730,314 6.500%, due 03/01/26................................... 603,222 564,196 7.000%, due 03/01/26................................... 4,695,000 4,517,435 Federal National Mortgage Association Principal Strip 0.000%, due 11/22/01(c)................ 2,400,000 2,343,360 Government National Mortgage Association 11.000%, due 09/15/15.................................. 388,028 434,225 7.750%, due 06/16/20................................... 600,000 613,406 8.000%, due 08/15/22................................... 1,049,680 1,063,965 7.000%, due 06/15/23................................... 430,480 412,854 7.000%, due 07/15/23................................... 451,385 432,903 7.000%, due 09/15/23................................... 99,483 95,410 9.000%, due 07/15/24................................... 194,488 203,482 8.500%, due 11/15/24................................... 186,892 192,147 8.500%, due 01/15/25................................... 408,634 420,124
FACE AMOUNT VALUE ----------- ------------ 9.000%, due 05/15/25................................. $ 507,805 $ 531,288 7.500%, due 06/15/25................................. 2,186,028 2,154,134 8.000%, due 02/15/26................................. 2,489,061 2,522,937 7.500%, due 03/15/26................................. 2,250,000 2,216,936 6.500%, due 03/20/26................................. 1,503,472 1,391,170 ------------ 40,830,182 ------------ U.S. GOVERNMENT OBLIGATIONS--26.73% U.S. Treasury Notes and Bonds 5.500%, due 11/15/98................................. 6,975,000 6,866,016 6.375%, due 03/31/01................................. 11,785,000 11,729,752 5.750%, due 08/15/03................................. 15,025,000 14,297,219 6.500%, due 05/15/05................................. 8,625,000 8,503,707 8.125%, due 05/15/21................................. 1,480,000 1,667,312 U.S. Treasury Principal Strips 0.000%, due 11/15/04................................. 16,725,000 9,547,132 0.000%, due 05/15/05................................. 9,860,000 5,429,113 0.000%, due 02/15/15................................. 4,990,000 1,348,647 0.000%, due 08/15/15................................. 1,470,000 382,876 0.000%, due 11/15/15................................. 5,240,000 1,338,610 ------------ 61,110,384 ------------ Total U.S. Bonds (Cost $128,481,496).................. 127,399,583 ------------ SHORT-TERM INVESTMENTS--6.76% U.S. GOVERNMENT OBLIGATIONS--0.34% U.S. Treasury Bills 5.030%, due 11/14/96................................. 15,000 14,715 5.050%, due 11/14/96................................. 55,000 53,951 5.140%, due 11/14/96................................. 710,000 696,213 ------------ 764,879 ------------ COMMERCIAL PAPER--6.42% Airtouch Communications, Inc. 5.480%, due 07/01/96.... 1,000,000 1,000,000 Dial Corp. 5.550%, due 07/17/96....................... 2,000,000 1,995,067 FMC Corp. 5.480%, due 07/08/96........................ 1,500,000 1,498,401 The Limited, Inc., 5.650%, due 07/01/96............... 2,000,000 2,000,000 Lockheed Martin Corp. 5.630%, due 07/01/96............ 4,216,000 4,216,000 Melville Corp. 5.650%, due 07/01/96................... 2,500,000 2,500,000 PS Colorado Credit Corp. 5.550%, due 07/02/96......... 1,500,000 1,499,769 ------------ 14,709,237 ------------ Total Short-Term Investments (Cost $15,474,116)....... 15,474,116 ------------ Total Investments (Cost $221,129,000)--103.85%(a)...................... 237,403,692 ------------ Liabilities, less cash and other assets--(3.85%)...... (8,795,399) ------------ Net Assets--100%...................................... $228,608,293 ============
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 10 U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $221,129,000; and net unrealized appreciation consisted of: Gross unrealized appreciation................................ $18,777,078 Gross unrealized depreciation................................ (2,502,386) ----------- Net unrealized appreciation................................ $16,274,692 ===========
(b) Non-income producing security (c) Interest rate 0.00% until 11/01/96, 7.94%, until maturity MTN: Medium term note FUTURES CONTRACTS (NOTE 4) The U.S. Balanced Fund had the following open futures contracts as of June 30, 1996:
SETTLEMENT CURRENT UNREALIZED DATE COST/PROCEEDS VALUE GAIN/(LOSS) ---------- ------------- ----------- ----------- INTEREST RATE FUTURES BUY CONTRACTS 5 Year U.S. Treasury Note, 36 contracts..... Sept. 1996 $ 1,863,625 $ 1,862,031 $(1,594) 10 Year U.S. Treasury Note, 23 contracts..... Sept. 1996 2,473,937 2,472,500 (1,437) 30 Year U.S. Treasury Bond, 17 contracts..... Sept. 1996 3,811,125 3,807,000 (4,125) INDEX FUTURES SALE CON- TRACTS Standard & Poors 500, 46 contracts.............. Sept. 1996 15,637,700 15,566,400 71,300 ------- Total................. $64,144 =======
The aggregate market value of investments pledged to cover margin requirements for the open futures positions at June 30, 1996 was $764,879. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 11 U.S. BALANCED FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1996 ASSETS: Investments, at value (Cost $221,129,000) (Note 1)............... $237,403,692 Receivables: Investment securities sold...................................... 9,757,122 Dividends....................................................... 117,126 Interest........................................................ 1,308,008 Fund shares sold................................................ 112,481 Due from Advisor (Note 2)....................................... 116,395 Other assets..................................................... 54,849 ------------ TOTAL ASSETS.................................................. 248,869,673 ------------ LIABILITIES: Payables: Investment securities purchased................................. 19,680,997 Fund shares redeemed............................................ 366,239 Variation margin (Note 4)....................................... 32,031 Accrued expenses................................................ 182,113 ------------ TOTAL LIABILITIES............................................. 20,261,380 ------------ NET ASSETS........................................................ $228,608,293 ============ NET ASSETS CONSIST OF: Paid in capital (Note 6)......................................... $206,237,387 Accumulated undistributed net investment income.................. 1,459,205 Accumulated net realized gain.................................... 4,572,865 Net unrealized appreciation...................................... 16,338,836 ------------ NET ASSETS.................................................... $228,608,293 ============ OFFERING PRICE PER SHARE: Brinson Class: Net asset value, offering price and redemption price per share (Based on net assets of $227,828,950 and 19,452,253 shares is- sued and outstanding) (Note 6)................................. $ 11.71 ============ SwissKey Class: Net asset value, offering price and redemption price per share (Based on net assets of $779,343 and 66,755 shares issued and outstanding) (Note 6).... $ 11.67 ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 12 U.S. BALANCED FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1996 INVESTMENT INCOME Interest.......................................................... $ 8,113,714 Dividends......................................................... 1,870,968 ----------- TOTAL INCOME................................................... 9,984,682 ----------- EXPENSES: Advisory (Note 2)................................................. 1,465,283 Administration.................................................... 140,841 Custodian......................................................... 76,416 Distribution (Note 5)............................................. 1,205 Other............................................................. 441,819 ----------- TOTAL EXPENSES................................................. 2,125,564 Expenses waived by Advisor (Note 2)............................ (449,752) ----------- NET EXPENSES................................................... 1,675,812 ----------- NET INVESTMENT INCOME ......................................... 8,308,870 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments...................................................... 8,975,089 Futures contracts................................................ (741,884) ----------- Net realized gain.............................................. 8,233,205 ----------- Change in net unrealized appreciation or depreciation on: Investments ..................................................... 8,614,843 Futures contracts................................................ 61,569 ----------- Change in net unrealized appreciation or depreciation.......... 8,676,412 ----------- Net realized and unrealized gain.................................. 16,909,617 ----------- Net increase in net assets resulting from operations.............. $25,218,487 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 13 U.S. BALANCED FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
YEAR DECEMBER 30, 1994* ENDED THROUGH JUNE 30, 1996 JUNE 30, 1995 ------------- ------------------ OPERATIONS: Net investment income........................ $ 8,308,870 $ 2,935,679 Net realized gain............................ 8,233,205 6,155,398 Change in net unrealized appreciation or de- preciation.................................. 8,676,412 7,662,424 ------------ ------------ Net increase in net assets resulting from op- erations.................................... 25,218,487 16,753,501 ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class............................... (7,711,341) (1,993,463) SwissKey Class.............................. (9,781) -- Distributions from net realized gain: Brinson Class............................... (9,885,505) -- SwissKey Class.............................. (992) -- ------------ ------------ Total distributions to shareholders.......... (17,607,619) (1,993,463) ------------ ------------ CAPITAL SHARE TRANSACTIONS: Shares sold.................................. 81,710,433 154,231,504 Shares issued on reinvestment of distribu- tions....................................... 17,593,608 1,991,226 Shares redeemed.............................. (36,030,444) (13,268,940) ------------ ------------ Net increase in net assets resulting from capital share transactions (Note 6).................................... 63,273,597 142,953,790 ------------ ------------ TOTAL INCREASE IN NET ASSETS.............. 70,884,465 157,713,828 ------------ ------------ NET ASSETS: Beginning of period.......................... 157,723,828 10,000 ------------ ------------ End of period (including accumulated undis- tributed net investment income of $1,459,205 and $942,216, respectively)................. $228,608,293 $157,723,828 ============ ============
* Commencement of investment operations See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 14 U.S. BALANCED FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
YEAR DECEMBER 30, 1994* ENDED THROUGH BRINSON CLASS JUNE 30, 1996 JUNE 30, 1995 - ------------------------------------------------------------------------------- Net asset value, beginning of period.......... $ 11.23 $ 10.00 -------- -------- Income from investment operations: Net investment income....................... 0.44 0.23 Net realized and unrealized gain............ 1.04 1.16 -------- -------- Total income from investment operations... 1.48 1.39 -------- -------- Less distributions: Distributions from net investment income.... (0.43) (0.16) Distributions from net realized gain........ (0.57) -- -------- -------- Total distributions....................... (1.00) (0.16) -------- -------- Net asset value, end of period................ $ 11.71 $ 11.23 ======== ======== Total return (non-annualized)................. 13.52% 13.91% Ratios/Supplemental data Net assets, end of period (in 000s).......... $227,829 $157,724 Ratio of expenses to average net assets: Before expense reimbursement................ 1.01% 1.06%** After expense reimbursement................. 0.80% 0.80%** Ratio of net investment income to average net assets: Before expense reimbursement................ 3.76% 4.36%** After expense reimbursement................. 3.97% 4.63%** Portfolio turnover rate...................... 240% 196% Average commission rate paid per share....... $ 0.0481 N/A
*Commencement of investment operations **Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 15 U.S. BALANCED FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout the period presented.
JULY 31, 1995* THROUGH SWISSKEY CLASS JUNE 30, 1996 - -------------------------------------------------------------------------------- Net asset value, beginning of period............................. $ 11.38 ------- Income from investment operations: Net investment income.......................................... 0.42 Net realized and unrealized gain............................... 0.86 ------- Total income from investment operations...................... 1.28 ------- Less distributions: Distributions from net investment income....................... (0.42) Distributions from net realized gain........................... (0.57) ------- Total distributions.......................................... (0.99) ------- Net asset value, end of period................................... $ 11.67 ======= Total return (non-annualized).................................... 11.54% Ratios/Supplemental data Net assets, end of period (in 000s)............................. $ 779 Ratio of expenses to average net assets: Before expense reimbursement................................... 1.51%** After expense reimbursement.................................... 1.30%** Ratio of net investment income to average net assets: Before expense reimbursement................................... 3.26%** After expense reimbursement.................................... 3.47%** Portfolio turnover rate......................................... 240% Average commission rate paid per share.......................... $0.0481
*Commencement of SwissKey Class distribution **Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 16 U.S. EQUITY FUND - -------------------------------------------------------------------------------- LOGO The U.S. Equity Fund is an actively managed portfolio that invests in common stocks of U.S. corporations. The Fund is diversified by issue and industry; it is typically 70% invested in large capitalization stocks, with the remaining 30% in intermediate and small capitalization stocks. Investment strategies emphasize stock selection with attention to the management of factor and industry exposures. For the period February 28, 1994 (performance inception date) to June 30, 1996, the Brinson U.S. Equity Fund provided an annualized return of 20.23% compared to its benchmark, the Wilshire 5000 Index, return of 18.68%. For the year ended June 30, 1996, the Fund returned 30.57%, while the benchmark returned 26.22%. The total return of the Brinson U.S. Equity Fund was 11.23% for the first six months of 1996, compared to the 10.27% return for the Wilshire 5000 Index. The following paragraphs review the sources of excess returns in the first half of 1996. Market exposure (average beta of 1.02) modestly benefited Fund relative performance in the strong equity market environment which characterized the first half of 1996. However, other broad factor positions were a fairly neutral influence on results. While there was a positive return to the Fund's lower than benchmark exposure to both growth and yield, the Fund's tilt toward the traditional value measures of low price-earnings and price-book proved an offset. An underweighting in issues with above normal foreign-source earnings added to results as profit comparisons for multinationals began to suffer from the strong dollar, as well as some weakness in the European economies. Industry weightings also had a neutral impact on excess returns calendar year- to-date. On the positive side, the Fund's low exposure to telephone and electric utility stocks benefited results due to heightened investor concern over intensifying competition as well as higher interest rates. Offsetting these gains were the Fund overweightings in bank and insurance stocks where relative performance also often varies inversely with interest rates. Among basic industries, the Fund underweighting in chemicals was an advantage but was negated by an overweighting in papers and steel. Other positive results included overweightings in aerospace, cosmetics and leisure stocks, while negative impacts included the overweightings in railroads and pollution control and the underweighting in international oil issues. The overall stock specific influence upon the Fund's active return was significantly positive in the first six months of 1996. Among large capitalization issues, the best performers were Citicorp, Sprint, Cigna and Corning, while the worst were Lockheed Martin, Kimberly Clark, Automatic Data Processing and Mattel. In the intermediate capitalization segment of the Fund, the strongest contributors were Allergan, Nextel Communications, Food Lion and Comverse Technology, while the weakest were Forest Labs, Dial Corp., American Mobile Satellite and Lyondell Petrochemical. ------------------------------------------------------------ 17 U.S. EQUITY FUND - -------------------------------------------------------------------------------- LOGO TOTAL RETURN
6 months 1 year Annualized ended ended 2/28/94* 6/30/96 6/30/96 to 6/30/96 - ----------------------------------------------------- BRINSON U.S. EQUITY FUND 11.23% 30.57% 20.23% - ----------------------------------------------------- Wilshire 5000 Index 10.27 26.22 18.68 - -----------------------------------------------------
*Performance inception date of the Brinson U.S. Equity Fund. Total return includes reinvestment of all capital gain and income distributions. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $100,000 This chart shows the growth any income taxes payable by in the value of an shareholders on income divi- investment in the Brinson dends and capital gain dis- U.S. Equity Fund and the tributions. Past perfor- Wilshire 5000 Index if you mance is no guarantee of fu- had invested $100,000 on ture results. Share price February 28, 1994, and had and return will vary with reinvested all your income market conditions; investors dividends and capital gain may realize a gain or loss distributions through June upon redemption. 30, 1996. No adjustment has been made for BRINSON U.S. EQUITY FUND VS. WILSHIRE 5000 INDEX Wealth Value with Dividends Reinvested [CHART APPEARS HERE] 3/31/94 6/30/96 -------- -------- Brinson U.S. Equity Fund $100,000 $153,666 Wilshire 5000 Index $100,000 $149,125 Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. ------------------------------------------------------------ 18 U.S. EQUITY FUND - -------------------------------------------------------------------------------- LOGO INDUSTRY DIVERSIFICATION As a Percent of Net Assets As of June 30, 1996 - ------------------------------------------------------------------------------- U.S. EQUITIES Basic Industries Chemicals.............................................................. 0.80% Housing/Paper.......................................................... 3.60 Metals................................................................. 0.35 ----- 4.75 Capital Investments Capital Goods.......................................................... 9.01 Technology............................................................. 4.06 ----- 13.07 Consumer Autos/Durables......................................................... 1.02 Discretionary.......................................................... 7.14 Health: Drugs.......................................................... 7.37 Health: Non-Drugs...................................................... 3.72 Non-Durables........................................................... 10.57 Retail/Apparel......................................................... 4.34 ----- 34.16
*The Fund held a long position in stock index futures on June 30, 1996 which increased U.S. equity exposure from 96.11% to 98.94% and reduced exposure to Short-Term investments from 2.86% to 0.03%. - ------------------------------------------------------------ TOP TEN U.S. EQUITY HOLDINGS As of June 30, 1996
Percent of Net Assets - -------------------------------------------- 1. Citicorp 5.04% 2. Lockheed Martin Corp. 4.90 3. Chase Manhattan Corp. 4.20 4. Burlington Northern Santa Fe 3.81 5. Enron Corp. 3.71 6. Avon Products, Inc. 3.34 7. Schering Plough Corp. 3.05 8. Kimberly-Clark Corp. 2.91 9. Mattel, Inc. 2.75 10. Aon Corp. 2.61 - --------------------------------------------
Energy.................................................................. 5.20% Financial Banks.................................................................. 11.02 Non-Banks.............................................................. 9.93 ------ 20.95 Services................................................................ 6.47 Transportation.......................................................... 4.86 Utilities............................................................... 3.96 Miscellaneous........................................................... 2.69 ------ Total U.S. Equities.................................................. 96.11* ------ SHORT-TERM INVESTMENTS.................................................. 2.86* ------ TOTAL INVESTMENTS.................................................... 98.97 CASH AND OTHER ASSETS, LESS LIABILITIES ...................................................... 1.03 ------ NET ASSETS.............................................................. 100.00% ======
- --------------- ------------------------------------------------------------ 19 U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - --------------------------------------------------------------------------------
SHARES VALUE ------- ------------ U.S. Equities -- 96.11% Aetna Life & Casualty Co................................... 33,300 $ 2,380,950 Allergan, Inc.............................................. 55,600 2,182,300 Allstate Corp.............................................. 31,600 1,441,750 Alza Corp. (b)............................................. 54,200 1,483,725 American Mobile Satellite Corp., Inc. (b).................. 5,200 80,600 Aon Corp................................................... 67,700 3,435,775 Automatic Data Processing, Inc............................. 63,600 2,456,550 Avon Products, Inc......................................... 97,600 4,404,200 Bard (C.R.), Inc........................................... 33,600 1,142,400 Beckman Instruments, Inc................................... 21,700 824,600 Biogen, Inc. (b)........................................... 5,000 274,375 Birmingham Steel Corp...................................... 21,700 355,338 Boeing Co.................................................. 14,400 1,254,600 Boston Technology, Inc. (b)................................ 21,700 366,188 Brinker International, Inc. (b)............................ 15,700 235,500 Burlington Northern Santa Fe............................... 62,000 5,014,250 Centerior Energy Co........................................ 45,800 337,775 Chase Manhattan Corp....................................... 78,300 5,529,938 CIGNA Corp................................................. 26,900 3,170,838 Citicorp................................................... 80,300 6,634,787 CMS Energy Corp............................................ 59,300 1,830,887 Coca-Cola Enterprises, Inc................................. 52,000 1,800,500 Comerica, Inc.............................................. 14,900 664,913 Comverse Techonology, Inc. (b)............................. 16,600 506,300 Cooper Cameron Corp. (b)................................... 7,029 307,519 Corning, Inc............................................... 84,800 3,254,200 Dial Corp.................................................. 44,300 1,268,087 EMC Corp./Mass (b)......................................... 61,700 1,149,163 Enron Corp................................................. 119,700 4,892,737 Entergy Corp............................................... 16,500 468,188 Federal Express Corp. (b).................................. 6,200 508,400 Federated Department Stores (b)............................ 57,800 1,972,425 FileNet Corp. (b).......................................... 8,400 306,600 First Data Corp............................................ 16,215 1,291,120 Food Lion, Inc. Class A.................................... 77,100 611,981 Ford Motor Co.............................................. 54,700 1,770,912 Forest Laboratories, Inc. (b).............................. 36,800 1,421,400 Gannett Co., Inc........................................... 36,200 2,561,150 General Instrument Corp. (b)............................... 86,500 2,497,688 Genzyme Corp. (b).......................................... 7,100 356,775 Goodyear Tire & Rubber Co.................................. 65,100 3,141,075 Health Care and Retirement Corp. (b)....................... 29,250 694,687 Honeywell, Inc............................................. 43,800 2,387,100 Inland Steel Industries, Inc............................... 11,000 215,875 Interpublic Group of Companies, Inc........................ 27,000 1,265,625 James River Corp. of Virginia.............................. 31,200 822,900 Kimberly-Clark Corp........................................ 49,600 3,831,600 Kroger Co. (b)............................................. 22,800 900,600 Lockheed Martin Corp....................................... 76,900 6,459,600 Lyondell Petrochemical Co.................................. 59,300 1,430,613 Magna Group, Inc........................................... 9,300 223,200 Manor Care, Inc............................................ 35,500 1,397,812 Mattel, Inc................................................ 126,375 3,617,484
SHARES VALUE ---------- ------------ Melville Corp........................................... 73,700 $ 2,984,850 Nabisco Holdings Corp. Class A.......................... 6,000 212,250 National Semiconductor Corp. (b)........................ 63,200 979,600 Nextel Communications, Inc. Class A (b)................. 54,600 1,040,812 Old Republic International Corp......................... 31,550 682,269 Owens Illinois, Inc. (b)................................ 48,500 776,000 Pentair, Inc............................................ 25,500 765,000 Pfizer, Inc............................................. 3,700 264,087 Philip Morris Companies, Inc............................ 11,600 1,206,400 RJR Nabisco Convertible Preferred "C"................... 176,600 1,147,900 RJR Nabisco Holdings Corp............................... 18,740 580,940 Schering Plough Corp.................................... 64,000 4,016,000 Seagate Technology, Inc. (b)............................ 16,900 760,500 Sprint Corp............................................. 42,300 1,776,600 State Street Boston Corp................................ 13,000 663,000 Timken Co............................................... 15,100 585,125 Transamerica Corp....................................... 15,100 1,234,425 Tyson Foods, Inc. Class A............................... 45,000 1,231,875 Ultramar Corp........................................... 23,700 687,300 US Bancorp.............................................. 37,000 1,336,625 USF&G Corp.............................................. 49,200 805,650 Westvaco Corp........................................... 13,000 388,375 Whitman Corp............................................ 22,800 550,050 WMX Technologies, Inc................................... 68,900 2,256,475 York International Corp................................. 7,500 388,125 360 Communications Co. (b).............................. 18,833 451,992 ------------ Total U.S. Equities (Cost $108,987,744)................. 126,607,780 ------------ FACE AMOUNT VALUE ---------- ------------ Short-Term Investments -- 2.86% U.S. GOVERNMENT OBLIGATIONS -- 0.22% U.S. Treasury Bills 5.300%, due 11/14/96................ $ 300,000 $ 293,993 ------------ COMMERCIAL PAPER -- 2.64% Airtouch Communications, Inc. 5.480%, due 07/01/96................................... 1,000,000 1,000,000 FMC Corp. 5.480%, due 07/08/96.......................... 250,000 249,734 Kerr-McGee Credit Corp. 5.500%, due 07/09/96............ 250,000 249,694 The Limited, Inc. 5.650%, due 07/01/96.................. 1,000,000 1,000,000 Lockheed Martin Corp. 5.630%, due 07/01/96.............. 971,000 971,000 ------------ 3,470,428 ------------ Total Short-Term Investments (Cost $3,764,421)...................................... 3,764,421 ------------ Total Investments (Cost $112,752,165) -- 98.97% (a)...................... 130,372,201 ------------ Cash and other assets, less liabilities -- 1.03%........ 1,356,544 ------------ Net Assets -- 100%...................................... $131,728,745 ============
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 20 U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $112,752,165; and net unrealized appreciation consisted of: Gross unrealized appreciation................................ $18,765,809 Gross unrealized depreciation................................ (1,145,773) ----------- Net unrealized appreciation................................ $17,620,036 ===========
(b) Non-income producing security FUTURES CONTRACTS (NOTE 4) The U.S. Equity Fund had the following open index futures contracts as of June 30, 1996:
SETTLEMENT CURRENT UNREALIZED DATE COST VALUE (LOSS) ---------- ---------- ---------- ---------- INDEX FUTURES BUY CONTRACTS Standard & Poors 500, 11 con- tracts...................... Sept. 1996 $3,725,175 $3,722,400 $(2,775) =======
The aggregate market value of investments pledged to cover margin requirements for the open futures positions at June 30, 1996 was $293,993. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 21 U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1996 ASSETS: Investments, at value (Cost $112,752,165) (Note 1) .............. $130,372,201 Cash............................................................. 279,476 Receivables: Investment securities sold...................................... 1,259,417 Dividends....................................................... 157,089 Variation margin (Note 4)....................................... 20,625 Fund shares sold................................................ 147,035 Due from Advisor (Note 2)....................................... 3,743 Other assets..................................................... 53,198 ------------ TOTAL ASSETS.................................................. 132,292,784 ------------ LIABILITIES: Payables: Investment securities purchased................................. 472,332 Accrued expenses................................................ 91,707 ------------ TOTAL LIABILITIES............................................. 564,039 ------------ NET ASSETS........................................................ $131,728,745 ============ NET ASSETS CONSIST OF: Paid in capital (Note 6)......................................... $107,348,442 Accumulated undistributed net investment income.................. 216,006 Accumulated net realized gain.................................... 6,547,036 Net unrealized appreciation...................................... 17,617,261 ------------ NET ASSETS.................................................... $131,728,745 ============ OFFERING PRICE PER SHARE: Brinson Class: Net asset value, offering price and redemption price per share (Based on net assets of $126,341,709 and 8,659,822 shares is- sued and outstanding) (Note 6)................................. $ 14.59 ============ SwissKey Class: Net asset value, offering price and redemption price per share (Based on net assets of $5,387,036 and 369,425 shares issued and outstanding) (Note 6)...................................... $ 14.58 ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 22 U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1996 INVESTMENT INCOME: Dividends......................................................... $ 1,833,948 Interest.......................................................... 234,616 ----------- TOTAL INCOME................................................... 2,068,564 ----------- EXPENSES: Advisory (Note 2)................................................. 638,063 Accounting........................................................ 71,226 Transfer Agent.................................................... 61,038 Administration.................................................... 58,286 Professional...................................................... 57,786 Custodian......................................................... 44,117 Distribution (Note 5)............................................. 6,178 Other............................................................. 110,440 ----------- TOTAL EXPENSES................................................. 1,047,134 Expenses waived by Advisor (Note 2)............................ (311,741) ----------- NET EXPENSES................................................... 735,393 ----------- NET INVESTMENT INCOME.......................................... 1,333,171 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain on: Investments...................................................... 7,340,103 Futures contracts................................................ 486,290 ----------- Net realized gain ............................................. 7,826,393 ----------- Change in net unrealized appreciation or depreciation on: Investments ..................................................... 13,381,838 Futures contracts ............................................... (24,600) ----------- Change in net unrealized appreciation or depreciation.......... 13,357,238 ----------- Net realized and unrealized gain ................................. 21,183,631 ----------- Net increase in net assets resulting from operations.............. $22,516,802 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 23 U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
YEAR YEAR ENDED ENDED JUNE 30, 1996 JUNE 30, 1995 ------------- ------------- OPERATIONS: Net investment income............................. $ 1,333,171 $ 440,023 Net realized gain ................................ 7,826,393 552,822 Change in net unrealized appreciation or deprecia- tion ............................................ 13,357,238 4,476,351 ------------ ----------- Net increase in net assets resulting from opera- tions............................................ 22,516,802 5,469,196 ------------ ----------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class................................... (1,233,245) (318,699) SwissKey Class.................................. (17,809) -- Distributions from net realized gain: Brinson Class................................... (1,764,213) (47,930) SwissKey Class.................................. (2,611) -- ------------ ----------- Total distributions to shareholders............... (3,017,878) (366,629) ------------ ----------- CAPITAL SHARE TRANSACTIONS: Shares sold....................................... 71,976,805 30,972,427 Shares issued on reinvestment of distributions.... 2,944,272 349,100 Shares redeemed................................... (5,264,717) (2,050,830) ------------ ----------- Net increase in net assets resulting from capital share transactions (Note 6)...................... 69,656,360 29,270,697 ------------ ----------- TOTAL INCREASE IN NET ASSETS................... 89,155,284 34,373,264 ------------ ----------- NET ASSETS: Beginning of year................................. 42,573,461 8,200,197 ------------ ----------- End of year (including accumulated undistributed net investment income of $216,006 and $133,889, respectively).................................... $131,728,745 $42,573,461 ============ ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 24 U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
YEAR YEAR FEBRUARY 22, 1994* ENDED ENDED THROUGH BRINSON CLASS JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994 - ------------------------------------------------------------------------------- Net asset value, beginning of period......................... $ 11.53 $ 9.65 $10.00 -------- ------- ------ Income from investment opera- tions: Net investment income......... 0.17 0.16 0.05 Net realized and unrealized gain (loss).................. 3.31 1.89 (0.36) -------- ------- ------ Total income (loss) from in- vestment operations........ 3.48 2.05 (0.31) -------- ------- ------ Less distributions: Distributions from net invest- ment income.................. (0.17) (0.14) (0.04) Distributions from net real- ized gain.................... (0.25) (0.03) -- -------- ------- ------ Total distributions......... (0.42) (0.17) (0.04) -------- ------- ------ Net asset value, end of period.. $ 14.59 $ 11.53 $ 9.65 ======== ======= ====== Total return (non-annualized)... 30.57% 21.45% (3.10%) Ratios/Supplemental data Net assets, end of period (in 000s)......................... $126,342 $42,573 $8,200 Ratio of expenses to average net assets: Before expense reimbursement.. 1.14% 1.70% 5.40% ** After expense reimbursement... 0.80% 0.80% 0.80% ** Ratio of net investment income to average net assets: Before expense reimbursement.. 1.13% 1.09% (2.82%)** After expense reimbursement... 1.47% 1.99% 1.78% ** Portfolio turnover rate........ 36% 33% 9% Average commission rate paid per share..................... $ 0.0457 N/A N/A
*Commencement of investment operations **Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 25 U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout the period presented.
JULY 31, 1995* THROUGH SWISSKEY CLASS JUNE 30, 1996 - -------------------------------------------------------------------------------- Net asset value, beginning of period............................. $ 11.94 ------- Income from investment operations: Net investment income.......................................... 0.10 Net realized and unrealized gain............................... 2.92 ------- Total income from investment operations...................... 3.02 ------- Less distributions: Distributions from net investment income....................... (0.13) Distributions from net realized gain........................... (0.25) ------- Total distributions.......................................... (0.38) ------- Net asset value, end of period................................... $ 14.58 ======= Total return (non-annualized).................................... 25.70% Ratios/Supplemental data Net assets, end of period (in 000s)............................. $ 5,387 Ratio of expenses to average net assets: Before expense reimbursement................................... 1.66%** After expense reimbursement.................................... 1.32%** Ratio of net investment income to average net assets: Before expense reimbursement................................... 0.61%** After expense reimbursement.................................... 0.95%** Portfolio turnover rate......................................... 36% Average commission rate paid per share.......................... $0.0457
*Commencement of SwissKey Class distribution **Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 26 U.S. BOND FUND - -------------------------------------------------------------------------------- LOGO The U.S. Bond Fund is an actively managed portfolio of debt securities selected from a wide range of maturities and market sectors. We believe markets do not always efficiently price fixed income securities and that a fundamental value- based investment process can increase portfolio returns. Our fixed income strategies combine judgments about the absolute value of the fixed income universe and the relative value of issuer sectors, maturity intervals, quality and coupon segments and specific fixed income securities. The Brinson U.S. Bond Fund produced a return of 3.60% since its inception on August 31, 1995 compared to the Salomon Brothers Broad Investment Grade (BIG) Bond Index return of 4.00%. In the first half of 1996, the Fund returned -1.79% compared to the Benchmark return of -1.25%. In January 1996 the Federal Reserve cut the overnight funds target rate from 5.50% to 5.25% where it remained throughout the first half of the year. In spite of that drop in short-term interest rates, intermediate and long-term interest rates rose sharply in the first half of 1996. Higher rates of utilization in product and labor markets gave rise to heightened investor concerns about inflation and possible increases in overnight funds rates, while rising equity market prices drew investors away from fixed income securities. By June 30th the yields on intermediate and long-term U.S. bonds were about 100 basis points above the levels of six months earlier. INDUSTRY DIVERSIFICATION As a Percentage of Net Assets As of June 30, 1996 - -------------------------------------------------------------------------------- U.S. BONDS Corporate Bonds Asset-backed........................................................... 2.06% CMO.................................................................... 2.44 Financial.............................................................. 12.26 Telecommunications..................................................... 2.40 Transportation......................................................... 1.01 ------ Total U.S. Corporate Bonds........................................... 20.17 U.S. Government Agencies................................................ 30.42 U.S. Government Obligations............................................. 42.21 International Dollar Bonds.............................................. 4.13 ------ Total U.S. Bonds..................................................... 96.93 ------ SHORT-TERM INVESTMENTS.................................................. 10.74 ------ TOTAL INVESTMENTS.................................................... 107.67 LIABILITIES, LESS CASH AND OTHER ASSETS.................................................. (7.67) ------ NET ASSETS.............................................................. 100.00% ======
------------------------------------------------------------- 27 U.S. BOND FUND - -------------------------------------------------------------------------------- LOGO TOTAL RETURN
6 months ended 8/31/95* 6/30/96 to 6/30/96 - ----------------------------------------------------------------------------- BRINSON U.S. BOND FUND -1.79% 3.60% - ----------------------------------------------------------------------------- Salomon Brothers Broad Investment Grade (BIG) Bond Index -1.25 4.00 - -----------------------------------------------------------------------------
*Inception date of the Brinson U.S. Bond Fund. Total return includes reinvestment of all capital gain and income distributions. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $100,000 This chart shows the growth any income taxes payable by in the value of an shareholders on income investment in the Brinson dividends and capital gain U.S. Bond Fund and the distributions. Past Salomon Brothers Broad performance is no guarantee Investment Grade (BIG) Bond of future results. Share Index if you had invested price and return will vary $100,000 on August 31, with market conditions; 1995, and had reinvested investors may realize a all your income dividends gain or loss upon and capital gain redemption. distributions through June 30, 1996. No adjustment has been made for BRINSON U.S. BOND FUND VS. SALOMON BROTHERS BIG BOND INDEX Wealth Value with Dividends Reinvested [CHART APPEARS HERE] 8/31/95 6/30/96 -------- -------- Brinson U.S. Bond Fund $100,000 $103,600 Salomon Brothers BIG Bond Index $100,000 $104,003 Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. ------------------------------------------------------------- 28 U.S. BOND FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ---------- ----------- Bonds -- 96.93% U.S. CORPORATE BONDS -- 20.17% American Express Credit Account Master Trust 96-1A 6.800%, due 12/15/03................................... $ 100,000 $ 100,430 Capital One Bank 6.830%, due 05/17/99................... 185,000 184,600 Citicorp Mortgage Securities 5.750%, due 06/25/09....... 87,336 71,830 Countrywide Funding FRN 6.600%, due 12/01/03............ 250,000 239,687 Dayton Hudson Credit Card 95-1 6.100%, due 02/25/02..... 100,000 99,548 Delta Air Lines 10.060%, due 01/02/16................... 85,000 98,228 GMAC MTN 7.450%, due 06/05/97........................... 250,000 252,953 Green Tree Financial 94-2 8.300%, due 05/15/19.......... 160,000 164,203 Lehman Brothers Holdings 7.250%, due 04/15/03........... 225,000 222,265 News America Corp. 7.750%, due 01/20/24................. 250,000 232,066 Salomon, Inc., 6.750%, due 02/15/03..................... 300,000 287,344 ----------- 1,953,154 ----------- INTERNATIONAL DOLLAR BONDS -- 4.13% Hanson PLC Notes 6.750%, due 09/15/05................... 100,000 95,896 Republic of Italy 6.875%, due 09/27/23.................. 250,000 225,313 Royal Bank of Scotland 7.375%, due 04/01/06............. 80,000 78,120 ----------- 399,329 ----------- U.S. GOVERNMENT AGENCIES -- 30.42% Federal Home Loan Mortgage Corp. 5.800%, due 08/15/19................................... 330,000 297,191 8.250%, due 08/15/23................................... 220,000 227,219 Federal Home Loan Mortgage Corp. Gold 6.000%, due 06/01/03................................... 115,000 110,616 6.000%, due 03/01/11................................... 245,000 231,525 8.000%, due 11/01/22................................... 76,410 77,329 Federal National Mortgage Association................... 7.500%, due 05/01/25................................... 222,457 219,605 6.500%, due 02/01/26................................... 134,433 125,695 6.500%, due 03/01/26................................... 350,322 327,658 7.000%, due 03/01/26................................... 395,000 380,061 Federal National Mortgage Association Principal Strip 0.000%, due 11/22/01(b)................................ 200,000 195,280 Government National Mortgage Association 9.000%, due 12/15/17................................... 74,394 78,717 7.500%, due 12/15/22................................... 432,167 428,904 7.500%, due 06/15/25................................... 137,775 135,765 6.500%, due 03/20/26................................... 119,481 110,556 ----------- 2,946,121 -----------
See accompanying notes to financial statements.
FACE AMOUNT VALUE ---------- ----------- U.S. GOVERNMENT OBLIGATIONS -- 42.21% U.S. Treasury Notes and Bonds 5.500%, due 11/15/98................................... $ 205,000 $ 201,797 6.375%, due 03/31/01................................... 1,275,000 1,269,023 6.250%, due 02/15/03................................... 100,000 98,187 5.750%, due 08/15/03................................... 240,000 228,375 6.500%, due 05/15/05................................... 1,065,000 1,050,023 8.125%, due 05/15/21................................... 380,000 428,093 U.S. Treasury Principal Strips 0.000%, due 11/15/04................................... 820,000 468,081 0.000%, due 02/15/15................................... 480,000 129,730 0.000%, due 08/15/15................................... 820,000 213,577 ----------- 4,086,886 ----------- Total U.S. Bonds (Cost $9,531,753)...................... 9,385,490 ----------- Short-Term Investments -- 10.74% COMMERCIAL PAPER -- 10.74% FMC Corp. 5.480%, due 07/08/96.......................... 300,000 299,681 The Limited, Inc. 5.650%, due 07/01/96.................. 400,000 400,000 Melville Corp. 5.650%, due 07/01/96..................... 340,000 340,000 ----------- Total Short-Term Investments (Cost $1,039,681)...................................... 1,039,681 ----------- Total Investments (Cost $10,571,434) -- 107.67%(a)....................... 10,425,171 ----------- Liabilities, less cash and other assets --(7.67%)....... (742,637) ----------- Net Assets -- 100%...................................... $ 9,682,534 ===========
(a) Aggregate cost for federal income tax purposes was $10,571,434; and net unrealized depreciation consisted of: Gross unrealized ap- preciation......... $ 22,490 Gross unrealized de- preciation......... (168,753) --------- Net unrealized de- preciation........ $(146,263) =========
(b) Interest rate 0.00% until 11/01/96, 7.94% until maturity. FRN:Floating rate note--The rate disclosed is that in effect at June 30, 1996. MTN: Medium term note - -------------------------------------------------------------------------------- 29 U.S. BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1996 ASSETS: Investments, at value (Cost $10,571,434) (Note 1)................ $10,425,171 Cash............................................................. 46,542 Receivables: Investment securities sold...................................... 422,924 Interest........................................................ 92,192 Due from Advisor (Note 2)....................................... 55,316 Other assets..................................................... 15,501 ----------- TOTAL ASSETS.................................................. 11,057,646 ----------- LIABILITIES: Payables: Investment securities purchased................................. 1,311,852 Accrued expenses................................................ 63,260 ----------- TOTAL LIABILITIES............................................. 1,375,112 ----------- NET ASSETS........................................................ $ 9,682,534 =========== NET ASSETS CONSIST OF: Paid in capital (Note 6)......................................... $ 9,770,407 Accumulated undistributed net investment income.................. 90,190 Accumulated net realized loss.................................... (31,800) Net unrealized depreciation ..................................... (146,263) ----------- NET ASSETS.................................................... $ 9,682,534 =========== OFFERING PRICE PER SHARE: Brinson Class: Net asset value, offering price and redemption price per share (Based on net assets of $9,046,722 and 911,170 shares issued and outstanding) (Note 6)...................................... $ 9.93 =========== SwissKey Class: Net asset value, offering price and redemption price per share (Based on net assets of $635,812 and 64,124 shares issued and outstanding) (Note 6).......................................... $ 9.92 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 30 U.S. BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE PERIOD AUGUST 31, 1995* TO JUNE 30, 1996 INVESTMENT INCOME: Interest............................................................ $ 503,035 --------- TOTAL INCOME..................................................... 503,035 --------- EXPENSES: Registration........................................................ 47,508 Professional........................................................ 44,175 Transfer Agent...................................................... 41,400 Advisory (Note 2)................................................... 37,868 Accounting.......................................................... 34,335 Printing............................................................ 29,262 Custodian........................................................... 25,029 Distribution (Note 5)............................................... 1,363 Other............................................................... 16,080 --------- TOTAL EXPENSES................................................... 277,020 Expenses waived and reimbursed by Advisor (Note 2)............... (230,216) --------- NET EXPENSES..................................................... 46,804 --------- NET INVESTMENT INCOME ........................................... 456,231 --------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized loss................................................... (11,035) Change in net unrealized appreciation or depreciation............... (146,263) --------- Net realized and unrealized loss.................................... (157,298) --------- Net increase in net assets resulting from operations................ $ 298,933 =========
*Commencement of investment operations See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 31 U.S. BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF CHANGES IN NET ASSETS FOR THE PERIOD AUGUST 31, 1995* TO JUNE 30, 1996 OPERATIONS: Net investment income............................................ $ 456,231 Net realized loss................................................ (11,035) Change in net unrealized appreciation or depreciation............ (146,263) ----------- Net increase in net assets resulting from operations............. 298,933 ----------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class................................................... (350,335) SwissKey Class.................................................. (13,132) Distributions in excess of net realized gain: Brinson Class................................................... (23,071) SwissKey Class.................................................. (268) ----------- Total distributions to shareholders.............................. (386,806) ----------- CAPITAL SHARE TRANSACTIONS: Shares sold...................................................... 10,200,031 Shares issued on reinvestment of distributions................... 386,807 Shares redeemed.................................................. (867,431) ----------- Net increase in net assets resulting from capital share transac- tions (Note 6).................................................. 9,719,407 ----------- TOTAL INCREASE IN NET ASSETS.................................. 9,631,534 ----------- NET ASSETS: Beginning of period.............................................. 51,000 ----------- End of period (including accumulated undistributed net investment income of $90,190).............................................. $ 9,682,534 ===========
* Commencement of investment operations See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 32 U.S. BOND FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout the period presented.
AUGUST 31, 1995* THROUGH BRINSON CLASS JUNE 30, 1996 - -------------------------------------------------------------------------------- Net asset value, beginning of period........................... $10.00 ------ Income from investment operations: Net investment income........................................ 0.50 Net realized and unrealized loss............................. (0.14) ------ Total income from investment operations.................... 0.36 ------ Less distributions: Distributions from net investment income..................... (0.40) Distributions in excess of net realized gain................. (0.03) ------ Total distributions........................................ (0.43) ------ Net asset value, end of period................................. $ 9.93 ====== Total return (non-annualized).................................. 3.60% Ratios/Supplemental data Net assets, end of period (in 000s)........................... $9,047 Ratio of expenses to average net assets: Before expense reimbursement................................. 3.63%** After expense reimbursement.................................. 0.60%** Ratio of net investment income to average net assets: Before expense reimbursement................................. 3.00%** After expense reimbursement.................................. 6.03%** Portfolio turnover rate....................................... 363%
*Commencement of investment operations **Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 33 U.S. BOND FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout the period presented.
AUGUST 31, 1995* THROUGH JUNE 30, SWISSKEY CLASS 1996 - -------------------------------------------------------------------------------- Net asset value, beginning of period........................... $10.00 ------ Income from investment operations: Net investment income........................................ 0.46 Net realized and unrealized loss............................. (0.13) ------ Total income from investment operations.................... 0.33 ------ Less distributions: Distributions from net investment income..................... (0.38) Distributions in excess of net realized gain................. (0.03) ------ Total distributions........................................ (0.41) ------ Net asset value, end of period................................. $ 9.92 ====== Total return (non-annualized).................................. 3.24% Ratios/Supplemental data Net assets, end of period (in 000s)........................... $636 Ratio of expenses to average net assets: Before expense reimbursement................................. 4.10%** After expense reimbursement.................................. 1.07%** Ratio of net investment income to average net assets: Before expense reimbursement................................. 2.53%** After expense reimbursement.................................. 5.56%** Portfolio turnover rate....................................... 363%
*Commencement of investment operations **Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 34 THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1.SIGNIFICANT ACCOUNTING POLICIES The Brinson Funds (the "Trust") is an open-end, management investment company registered under the Investment Company Act of 1940, as amended, as a series company. The Trust currently offers shares of seven series: Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund, and Non-U.S. Equity Fund. Each Fund has two classes of shares outstanding, Brinson Class and SwissKey Class. There are an unlimited number of shares of each class with par value of $0.001 authorized. Each share represents an identical interest in the investments of the Funds and has the same rights. The following is a summary of significant accounting policies consistently followed by the U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond Fund (each a "Fund," collectively the "Funds") in the preparation of their financial statements. A.INVESTMENT VALUATION: Securities for which market quotations are readily available are valued at the last available sales price on the exchange or market on which they are principally traded, or lacking any sales, at the last available bid price on the exchange or market on which such securities are principally traded. Securities for which market quotations are not readily available, including restricted securities which are subject to limitations on their sale, are valued at fair value as determined in good faith by or under the direction of the Trust's Board of Trustees. Fixed income/debt securities are valued using market quotations or independent services that use prices provided by market makers or estimates of market values obtained from yield data relating to instruments or securities with similar characteristics. Futures contracts are valued at the settlement price established each day on the exchange on which they are traded. Short-term obligations with a maturity of 60 days or less are valued at amortized cost, which approximates market value. B.INVESTMENT TRANSACTIONS: Investment transactions are accounted for on a trade date basis. Gains and losses on securities sold are determined on an identified cost basis. C.INVESTMENT INCOME: Interest income, which includes the amortization of premiums and discounts, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. D.FEDERAL INCOME TAXES: It is the policy of the Funds to comply with all requirements of the Internal Revenue Code (the "Code") applicable to regulated investment companies and to distribute substantially all of their taxable income to their shareholders. The Funds have met the requirements of the Code applicable to regulated investment companies for the period ended June 30, 1996, therefore, no federal income tax provision was required. E.DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of the Funds to distribute their respective net investment income on a semi-annual basis and net capital gains, if any, annually. Distributions to shareholders are recorded on the ex- dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. Differences in dividends per share between the classes are due to distribution expenses. Amounts equal to 12.96% and 38.62% of the amount taxable as ordinary income qualify for the dividends received deduction available to corporate shareholders for the U.S. Balanced Fund and the U.S. Equity Fund, respectively. F.INCOME AND EXPENSE ALLOCATIONS: All income earned and expenses incurred by the Funds will be borne on a pro rata basis by each of the classes, except that the Brinson Class will not incur any of the distribution expenses. G.USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. - -------------------------------------------------------------------------------- 35 THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 2.INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES Brinson Partners, Inc. (the "Advisor"), a registered investment advisor, provides the Funds with investment management services. As compensation for these services, each Fund pays the Advisor a monthly fee based on the Fund's respective average daily net assets. The Advisor has agreed to waive its fees and reimburse each Fund to the extent total annualized expenses exceed a specified percentage of each Fund's respective average daily net assets. Investment advisory fees and other transactions with affiliates for the period ended June 30, 1996, were as follows:
BRINSON SWISSKEY CLASS CLASS ADVISORY EXPENSE EXPENSE ADVISORY FEES WAIVED FEE CAP CAP FEES AND/OR REIMBURSED -------- ------- -------- ---------- ----------------- U.S. Balanced Fund....... 0.70% 0.80% 1.30% $1,465,283 $449,752 U.S. Equity Fund......... 0.70 0.80 1.32 638,063 311,741 U.S. Bond Fund........... 0.50 0.60 1.07 37,868 230,216
Certain officers of the Funds are also officers of the Advisor. All officers serve without direct compensation from the Funds. Trustees' fees paid to unaffiliated trustees were $7,319, $5,128 and $2,822 for the U.S. Balanced Fund, U.S. Equity Fund, and U.S. Bond Fund, respectively. 3.INVESTMENT TRANSACTIONS Investment transactions for the period ended June 30, 1996, excluding short- term investments, were as follows:
PROCEEDS PURCHASES FROM SALES ------------ ------------ U.S. Balanced Fund.................................... $518,922,718 $457,531,085 U.S. Equity Fund...................................... 96,973,632 31,250,356 U.S. Bond Fund........................................ 41,821,403 32,173,225
4.FUTURES CONTRACTS The Funds may purchase or sell exchange-traded futures contracts, which are contracts that obligate the Funds to make or take delivery of a financial instrument or the cash value of a securities index at a specified future date at a specified price. The Funds enter into such contracts to hedge a portion of their portfolio. Risks of entering into futures contracts include the possibility that there may be an illiquid market or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Funds are required to deposit either cash or securities (initial margin). Subsequent payments (variation margin) are made or received by the Funds, generally on a daily basis. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains or losses. The Funds recognize a realized gain or loss when the contract is closed or expires. The statement of operations reflects net realized and net unrealized gains and losses on these contracts. 5.DISTRIBUTION PLAN The Trust has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940. The Plan governs payments made for the expenses incurred in the promotion and distribution of the SwissKey Class of shares. Annual fees under the Plan, which include a 0.25% service fee, total 0.50%, 0.52% and 0.47% of the average daily net assets of the SwissKey Class of the U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond Fund, respectively. - -------------------------------------------------------------------------------- 36 THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 6.CAPITAL TRANSACTIONS Capital stock transactions were as follows:
U.S. BALANCED FUND --------------------------------------------- YEAR ENDED PERIOD ENDED JUNE 30, 1996 JUNE 30, 1995 --------------------- ----------------------- SHARES VALUE SHARES VALUE --------- ----------- ---------- ------------ Sales: Brinson Class................... 6,944,846 $80,934,038 15,121,050 $154,231,504 SwissKey Class.................. 67,290 776,395 -- -- --------- ----------- ---------- ------------ Total Sales................... 7,012,136 $81,710,433 15,121,050 $154,231,504 ========= =========== ========== ============ Dividend Reinvestment: Brinson Class................... 1,540,774 $17,588,758 178,265 $ 1,991,226 SwissKey Class.................. 422 4,850 -- -- --------- ----------- ---------- ------------ Total Dividend Reinvestment... 1,541,196 $17,593,608 178,265 $ 1,991,226 ========= =========== ========== ============ Redemptions: Brinson Class................... 3,073,501 $36,019,481 1,260,181 $ 13,268,940 SwissKey Class.................. 957 10,963 -- -- --------- ----------- ---------- ------------ Total Redemptions............. 3,074,458 $36,030,444 1,260,181 $ 13,268,940 ========= =========== ========== ============ U.S. EQUITY FUND --------------------------------------------- YEAR ENDED YEAR ENDED JUNE 30, 1996 JUNE 30, 1995 --------------------- ----------------------- SHARES VALUE SHARES VALUE --------- ----------- ---------- ------------ Sales: Brinson Class................... 5,125,613 $66,685,850 3,011,049 $ 30,972,427 SwissKey Class.................. 375,655 5,290,955 -- -- --------- ----------- ---------- ------------ Total Sales................... 5,501,268 $71,976,805 3,011,049 $ 30,972,427 ========= =========== ========== ============ Dividend Reinvestment: Brinson Class................... 222,497 $ 2,935,334 33,507 $ 349,100 SwissKey Class.................. 644 8,938 -- -- --------- ----------- ---------- ------------ Total Dividend Reinvestment... 223,141 $ 2,944,272 33,507 $ 349,100 ========= =========== ========== ============ Redemptions: Brinson Class................... 380,602 $ 5,174,675 202,160 $ 2,050,830 SwissKey Class.................. 6,874 90,042 -- -- --------- ----------- ---------- ------------ Total Redemptions............. 387,476 $ 5,264,717 202,160 $ 2,050,830 ========= =========== ========== ============ U.S. BOND FUND --------------------- PERIOD ENDED JUNE 30, 1996 --------------------- SHARES VALUE --------- ----------- Sales: Brinson Class................... 953,454 $ 9,550,552 SwissKey Class.................. 63,717 649,479 --------- ----------- Total Sales................... 1,017,171 $10,200,031 ========= =========== Dividend Reinvestment: Brinson Class................... 37,309 $ 373,407 SwissKey Class.................. 1,362 13,400 --------- ----------- Total Dividend Reinvestment... 38,671 $ 386,807 ========= =========== Redemptions: Brinson Class................... 84,593 $ 856,547 SwissKey Class.................. 1,055 10,884 --------- ----------- Total Redemptions............. 85,648 $ 867,431 ========= ===========
- -------------------------------------------------------------------------------- 37 REPORT OF INDEPENDENT AUDITORS - -------------------------------------------------------------------------------- The Board of Trustees and Shareholders The Brinson Funds -- U.S. Balanced Fund U.S. Equity Fund U.S. Bond Fund We have audited the accompanying statements of assets and liabilities, including the schedule of investments, of The Brinson Funds--U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond Fund as of June 30, 1996, the related statements of operations and changes in net assets and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of June 30, 1996, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The Brinson Funds--U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond Fund at June 30, 1996, the results of their operations and the changes in their net assets and the financial highlights for the periods indicated therein, in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP Ernst & Young LLP Chicago, Illinois August 9, 1996 - -------------------------------------------------------------------------------- 38 SPECIAL MEETING OF SHAREHOLDERS - -------------------------------------------------------------------------------- A Special Meeting of Shareholders was held on February 16, 1996. At the meeting, shareholders of the Funds were asked to consider and act upon amendments to the Trust's fundamental investment policies to (1) permit each Fund to invest in affiliated investment companies; and (2) permit each Fund to enter into forward foreign currency transactions for non-hedging purposes. The results of all matters voted on by shareholders of the Funds at the Special Meeting held on February 16, 1996, were as follows: A.AMENDMENT TO THE TRUST'S FUNDAMENTAL INVESTMENT POLICIES TO PERMIT EACH FUND TO INVEST IN AFFILIATED INVESTMENT COMPANIES:
FOR AGAINST ABSTAIN ---------- --------- ---------- U. S. Balanced Fund ............................ 14,907,986 -0- -0- U. S. Equity Fund............................... 5,340,548 -0- -0- U. S. Bond Fund................................. 880,287 -0- -0- B.AMENDMENT TO THE TRUST'S FUNDAMENTAL INVESTMENT POLICIES TO PERMIT EACH FUND TO ENTER INTO FORWARD FOREIGN CURRENCY TRANSACTIONS FOR NON-HEDGING PURPOSES: FOR AGAINST ABSTAIN ---------- --------- ---------- U. S. Balanced Fund............................. 1,006,826 -0- 13,901,160 U. S. Equity Fund............................... 4,225,480 1,115,068 -0- U. S. Bond Fund................................. 880,287 -0- -0-
- -------------------------------------------------------------------------------- 39 DISTRIBUTED BY: FUND/PLAN BROKER SERVICES, INC. 2 W. ELM STREET CONSHOHOCKEN, PA 19428 This report is submitted for the general information of the shareholders of the Funds. It is not authorized for distribution to prospective investors in the Funds unless preceded or accompanied by an effective Prospectus which includes details regarding the Funds' objectives, policies, expenses and other information. - -------------------------------------------------------------------------------- THE BRINSON FUNDS - -------------------------------------------------------------------------------- 209 South LaSalle Street . Chicago, Illinois 60604-1295 . Tel: (800) 448-2430 ----------------------------- THE BRINSON FUNDS BRINSON GLOBAL FUND BRINSON GLOBAL EQUITY FUND BRINSON GLOBAL BOND FUND ANNUAL REPORT JUNE 30, 1996 GLOBAL INSTITUTIONAL ASSET MANAGEMENT ----------------------------- CHICAGO.BASEL.LONDON.MELBOURNE.NEW YORK.PARIS.SINGAPORE.SYDNEY.TOKYO TRUSTEES AND OFFICERS - -------------------------------------------------------------------------------- LOGO TRUSTEES Walter E. Auch Frank K. Reilly, CFA Edward M. Roob OFFICERS Frank K. Reilly, CFA Carolyn M. Burke, CPA Chairman of the Board Assistant Secretary E. Thomas McFarlan Catherine E. Macrae President and Treasurer Assistant Secretary Thomas J. Digenan, CPA Debra L. Nichols Assistant Treasurer Assistant Secretary Bruce G. Leto Secretary ------------------------------------------------------------ 1 THE FUNDS' ADVISOR -- BRINSON PARTNERS, INC. - -------------------------------------------------------------------------------- LOGO Brinson Partners, Inc. is an institutional investment management firm structured around teams of investment specialists covering major world asset classes. We specialize in managing multiple asset portfolios that provide clients with the opportunity to participate in all major world asset classes. It is important that investment decisions, whether they pertain to a global portfolio or a single asset class portfolio, be made within the context of a global capital market perspective. Our coordinated application of investment strategies distinguishes Brinson Partners, Inc. as a leader in global investment management of institutional assets. We firmly believe that asset allocation is portfolio management at its highest and most important level. Performance is maximized through a comprehensive understanding of global investment markets and their interrelationships. Portfolio structure is tailored to specific client objectives and focused upon both risk and return considerations in the context of full long-term investment cycles. At Brinson Partners, Inc. our investment decisions are based on fundamental research, internally developed valuation systems and seasoned judgment. Our independent team approach allows for rapid responses to market changes, while providing each client with the benefit of our best talent and the flexibility to customize portfolios to meet unique requirements. ------------------------------------------------------------ 2 TABLE OF CONTENTS - -------------------------------------------------------------------------------- LOGO Shareholder Letter............................................................ 4 Global Economic and Market Highlights......................................... 5 Global Fund................................................................... 6 Schedule of Investments.....................................................10 Financial Statements........................................................17 Financial Highlights........................................................20 Global Equity Fund............................................................22 Schedule of Investments.....................................................26 Financial Statements........................................................31 Financial Highlights........................................................34 Global Bond Fund..............................................................36 Schedule of Investments.....................................................39 Financial Statements........................................................42 Financial Highlights........................................................45 The Brinson Funds--Notes to Financial Statements..............................47 Report of Independent Auditors................................................51 Special Meeting of Shareholders...............................................52 ------------------------------------------------------------- 3 SHAREHOLDER LETTER - -------------------------------------------------------------------------------- LOGO August 19, 1996 Dear Shareholder: We appreciate the confidence you have placed in us and are pleased to present you with the June 30, 1996 Annual Report for the Global Fund, Global Equity Fund and Global Bond Fund. This Report presents our current global economic and market outlook, as well as the Funds' recent investment strategies and performance. To summarize this information: Global Fund For the period from August 31, 1992 (performance inception date) to June 30, 1996, the Fund provided an annualized total return of 10.42%. The Fund returned 4.58% in the first half of 1996. The strategy of underweighting the overpriced equity markets in favor of the attractive bond markets remains in place. A portion of foreign currency exposure is hedged into U.S. dollars. Global Equity Fund For the period from January 31, 1994 (performance inception date) to June 30, 1996, the Fund provided an annualized total return of 10.42%. The Fund returned 8.91% in the first half of 1996. Reflecting only modestly attractive equity markets, the Fund maintains its 15% cash hedge. Primary underweights include the U.S. market, in light of its overvaluation and increasing volatility. A portion of foreign currency exposure is hedged into U.S. dollars. Global Bond Fund For the period from July 31, 1993 (performance inception date) to June 30, 1996, the Fund provided an annualized total return of 7.40%. The Fund returned 2.12% in the first half of 1996. Bond markets are generally attractive, with the exception of the Japanese market which continues to be the largest underweight. A portion of foreign currency exposure is hedged into U.S. dollars. We look forward to the challenges ahead and, as always, welcome your comments and suggestions. Sincerely, /s/ Gary P. Brinson Gary P. Brinson, CFA President and Chief Investment Officer Brinson Partners, Inc. ------------------------------------------------------------ 4 GLOBAL ECONOMIC AND MARKET HIGHLIGHTS - -------------------------------------------------------------------------------- LOGO Since the yen's peak in 1995, the Japanese economy has begun showing signs of recovery. Real GDP growth has recently turned up and output prices appear to have stopped falling. However, structural problems persist, as unemployment hit an all-time high in May. With continued slow economic growth through much of continental Europe, unemployment remains high. While the overpriced currencies of the deutschemark bloc are a contributing factor, structural rigidity and accompanying high labor costs exacerbate the problems. The U.S. continues to be a leader among developed countries in productivity improvements and the restraint of labor costs. Price pressures in most countries remain subdued, due to continuing central bank responsibility. The last 15 years have seen a powerful trend toward a reduction and convergence in inflation rates across countries. Nevertheless, bond markets have yet to fully accept a lower-inflation world. Any indication of potential price pressures, such as the recent strong employment reports in the U.S., adversely affects bond prices. GLOBAL ENVIRONMENT
6 months 1 year 3 years Annualized MAJOR MARKETS ended ended ended 8/31/92* Total Return in U.S. Dollars 6/30/96 6/30/96 6/30/96 to 6/30/96 - --------------------------------------------------------------------------- U.S. Equity 10.27% 26.22% 16.79% 16.86% Non-U.S. Equities (currency unhedged) 4.82 13.61 10.64 12.47 Non-U.S. Equities (currency hedged) 9.96 30.97 10.37 12.98 U.S. Bonds -1.25 4.99 5.30 6.39 Non-U.S. Bonds (currency unhedged) -1.28 -1.68 9.71 8.31 Non-U.S. Bonds (currency hedged) 3.55 11.52 8.19 8.93 U.S. Cash Equivalents 2.53 5.35 4.50 4.14 - --------------------------------------------------------------------------- MAJOR CURRENCIES 6 months 1 year 3 years Annualized Percent Change Relative to U.S. ended ended ended 8/31/92* Dollars 6/30/96 6/30/96 6/30/96 to 6/30/96 - --------------------------------------------------------------------------- Yen -5.95% -22.60% -0.90% 3.09% Pound 0.08 -2.33 1.33 -6.15 Deutschemark -5.97 -9.07 3.84 -2.03 Canadian Dollar -0.13 0.60 -2.07 -3.39 - ---------------------------------------------------------------------------
*Inception date of the Brinson Global Fund ------------------------------------------------------------ 5 GLOBAL FUND - -------------------------------------------------------------------------------- LOGO The Global Fund is an actively managed, diversified mutual fund that provides integrated asset management across and within securities markets. The investment process is strategic in nature and is driven by deviations of market price from fundamental value. We believe this philosophy offers the greatest potential for achieving enhanced long-term returns, while controlling risk. The Brinson Global Fund has provided an annualized return of 10.42% since its inception on August 31, 1992. This compares with the corresponding 12.75% return of its benchmark, the GSMI Mutual Fund Index. Fund performance over this period was achieved with an annualized volatility of 4.39%, well below the benchmark volatility of 5.71%. For the year ended June 30, 1996, the Fund returned 16.38%, while the benchmark returned 16.08%. For the first half of 1996, the Brinson Global Fund returned 4.58% compared to the 5.55% return of the benchmark. Substantial positive contributions to performance came from equity security selection and from the strategy of hedging risks in the overpriced yen, deutschemark, and DM-related currencies. Because many equity markets provided double-digit returns in dollar-hedged terms, the primary negative contributor to performance was the above-normal allocation to bond markets with corresponding underweights in equities. Market strategy within the Global Fund centers on reducing the risk of exposure to the overpriced equity markets; the relatively attractive bond markets are the primary overweights. Strategy for emerging markets investments mirrors that of the developed markets, with a small underweight in equities and a small overweight in bonds. A small underweight is also carried in the U.S. high yield bond market. Currency strategy continues to focus on controlling the risk of exposure to the overpriced yen and DM-related currencies. Strategy primarily favors the attractively priced U.S. dollar. ------------------------------------------------------------ 6 GLOBAL FUND - -------------------------------------------------------------------------------- LOGO TOTAL RETURN
Annualized 6 months 1 year 3 years 8/31/92* ended ended ended to 6/30/96 6/30/96 6/30/96 6/30/96 - ---------------------------------------------------------------------- BRINSON GLOBAL FUND 4.58% 16.38% 9.69% 10.42% GSMI Mutual Fund Index (currency unhedged)** 5.55 16.08 12.27 12.75 GSMI Mutual Fund Index (currency hedged)** 7.11 20.42 12.19 12.93 - ----------------------------------------------------------------------
*Inception date of the Brinson Global Fund. **An un-managed index compiled by the Advisor, constructed as follows: 40% Wilshire 5000 Index; 22% MSCI Non-U.S. Equity (Free) Index; 19% Salomon BIG Bond Index; 2% International Dollar Bond Index; 9% Salomon Non-U.S. Government Bond Index (unhedged); 2% JP Morgan EMBI+; 3% IFC Investable Index; and 3% High Yield Bond Index. Total return includes reinvestment of all capital gain and income distributions. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $100,000 This chart shows the growth in the value of an investment in the Brinson Global Fund and the GSMI Mutual Fund Index (currency unhedged and hedged) if you had invested $100,000 on August 31, 1992, and had reinvested all your income dividends and capital gain distributions through June 30, 1996. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. BRINSON GLOBAL FUND VS. GSMI MUTUAL FUND INDEX (CURRENCY UNHEDGED AND HEDGED) Wealth Value with Dividends Reinvested [CHART APPEARS HERE] 8/31/92 6/30/96 -------- -------- Brinson Global Fund $100,000 $146,227 GSMI Mutual Fund Index (currency unhedged) $100,000 $158,405 GSMI Mutual Fund Index (currency hedged) $100,000 $159,355 Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. ------------------------------------------------------------ 7 GLOBAL FUND - -------------------------------------------------------------------------------- LOGO ASSET ALLOCATION As of June 30, 1996
Current Benchmark Strategy - ----------------------------------------------------------------------------------------------- U.S. EQUITY 40.0% 25.0% Large Cap. Stocks 28.0 18.0 Small/Int. Cap. 12.0 7.0 NON-U.S. EQUITIES 22.0 17.0 Japan Equities 8.4 5.4 Other Equities 13.6 11.6 EMERGING MARKETS EQUITIES 3.0 2.0 DOLLAR BONDS 21.0 24.5 U.S. Bonds 19.0 22.5 International $ Bonds 2.0 2.0 HIGH YIELD BONDS 3.0 2.5 NON-U.S. BONDS 9.0 25.0 Japan Bonds 2.6 0.0 Other Bonds 6.4 25.0 EMERGING MARKETS DEBT 2.0 3.0 CASH EQUIVALENTS 0.0 1.0 - ----------------------------------------------------------------------------------------------- 100.0% 100.0%
TOP TEN U.S. EQUITY HOLDINGS As of June 30, 1996
Percent of Net Assets - ------------------------------------------------------------------------------ 1. Citicorp 1.39% 2. Lockheed Martin Corp. 1.35 3. Chase Manhattan Corp. 1.16 4. Burlington Northern Santa Fe 1.05 5. Enron Corp. 1.02 6. Avon Products, Inc. 0.92 7. Schering Plough Corp. 0.84 8. Kimberly-Clark Corp. 0.80 9. Mattel, Inc. 0.76 10. Aon Corp. 0.72 - ------------------------------------------------------------------------------
CURRENCY ALLOCATION As of June 30, 1996
Current Benchmark Strategy - -------------------------------------- U.S. 66.0% 85.9% Japan 11.0 0.0 U.K. 4.1 4.1 Continental Europe 12.2 5.0 Canada 1.2 1.2 Emerging Markets 3.0 2.0 Other 2.5 1.8 - -------------------------------------- 100.0% 100.0%
TOP TEN NON-U.S. EQUITY HOLDINGS As of June 30, 1996
Percent of Net Assets - ------------------------------------------------------------------------------ 1. Matsushita Electric Industrial Co. 0.22% 2. Royal Dutch Petroleum Co. 0.21 3. Toray Industries, Inc. 0.21 4. Ito Yokado Co. Ltd. 0.20 5. General Electric Co. PLC 0.20 6. Royal Dutch Petroleum Co. NY Shares 0.20 7. Lloyds TSB Group PLC 0.20 8. British Telecommunications PLC 0.18 9. Broken Hill Proprietary Co. Ltd. 0.18 10. British Petroleum Co. PLC 0.18 - ------------------------------------------------------------------------------
------------------------------------------------------------ 8 GLOBAL FUND - -------------------------------------------------------------------------------- INDUSTRY DIVERSIFICATION As a Percent of Net Assets As of June 30, 1996 - -------------------------------------------------------------------------------- U.S. EQUITIES Basic Industries Chemicals............................................................... 0.22% Housing/Paper........................................................... 0.99 Metals.................................................................. 0.10 ----- 1.31 Capital Investment Capital Goods........................................................... 2.48 Technology.............................................................. 1.12 ----- 3.60 Consumer Autos/Durables.......................................................... 0.28 Discretionary........................................................... 1.97 Health: Drugs........................................................... 2.03 Health: Non-Drugs....................................................... 1.03 Non-Durables............................................................ 2.92 Retail/Apparel.......................................................... 1.20 ----- 9.43 Energy................................................................... 1.43 Financial Banks................................................................... 3.04 Non-Banks............................................................... 2.74 ----- 5.78 Post Venture............................................................. 1.21 Services................................................................. 1.78 Transportation........................................................... 1.34 Utilities................................................................ 1.09 Miscellaneous............................................................ 0.75 ----- Total U.S. Equities................................................... 27.72* ----- NON-U.S. EQUITIES Aerospace & Military..................................................... 0.03 Airlines................................................................. 0.02 Appliances & Household Durables.......................................... 0.43 Automobiles.............................................................. 0.50 Banking.................................................................. 1.97 Beverages & Tobacco...................................................... 0.45 Broadcasting & Publishing................................................ 0.22 Building Materials....................................................... 0.21 Business & Public Service................................................ 0.58 Chemicals................................................................ 0.69 Construction............................................................. 0.37 Data Processing.......................................................... 0.17 Electric Components...................................................... 0.20 Electronics.............................................................. 0.70 Energy................................................................... 1.44 Financial Services....................................................... 0.20 - --------------------------------------------------------------------------------
Food & House Products................................................... 0.77% Forest Products......................................................... 0.30 Gold Mining............................................................. 0.03 Health & Personal Care.................................................. 0.55 Industrial Components................................................... 0.38 Insurance............................................................... 0.69 Leisure & Tourism....................................................... 0.21 Machinery & Engineering................................................. 0.28 Merchandising........................................................... 0.78 Metals.................................................................. 0.15 Miscellaneous Materials................................................. 0.24 Multi-Industry.......................................................... 0.62 Non-Ferrous Metals...................................................... 0.36 Real Estate............................................................. 0.08 Recreation.............................................................. 0.11 Shipping................................................................ 0.11 Steel................................................................... 0.12 Telecommunications...................................................... 0.78 Textiles and Apparel.................................................... 0.06 Transportation.......................................................... 0.15 Utilities............................................................... 0.90 ------ Total Non-U.S. Equities.............................................. 15.85* ------ EMERGING MARKETS EQUITIES............................................... 2.13 ------ U.S. BONDS Corporate Bonds Asset-Backed........................................................... 0.93 CMO.................................................................... 0.21 Consumer............................................................... 0.44 Financial.............................................................. 0.75 Telecommunications..................................................... 0.39 Transportation......................................................... 0.25 ------ 2.97 U.S. Government Agencies................................................ 6.02 U.S. Government Obligations............................................. 9.06 International Dollar Bonds.............................................. 2.09 ------ Total U.S. Bonds..................................................... 20.14* ------ HIGH YIELD BONDS........................................................ 2.55 ------ NON-U.S. BONDS Foreign Government Bonds................................................ 23.72 ------ EMERGING MARKETS DEBT................................................... 3.23 ------ SHORT-TERM INVESTMENTS.................................................. 4.14* ------ TOTAL INVESTMENTS.................................................... 99.48 CASH AND OTHER ASSETS, LESS LIABILITIES................................. 0.52 ------ NET ASSETS........................................................... 100.00% ======
LOGO * The Fund held a long position in Topix futures on June 30, 1996 which increased Japanese equity exposure from 4.78% to 5.31%. The Fund held a long position in U.S. Treasury futures which increased U.S. bond exposure from 20.14% to 23.52%. The Fund also held a short position in stock index futures which reduced U.S. equity exposure from 27.72% to 24.78%. These three adjustments result in a net decrease in the Fund's exposure to Short-Term Investments from 4.14% to 3.17%. ------------------------------------------------------------ 9 GLOBAL FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - --------------------------------------------------------------------------------
SHARES VALUE ------ ----- Equities -- 45.70% U.S. EQUITIES -- 27.72% Aetna Life & Casualty Co............................. 32,900 $ 2,352,350 Allergan, Inc........................................ 54,900 2,154,825 Allstate Corp........................................ 31,200 1,423,500 Alza Corp. (b)....................................... 53,500 1,464,563 American Mobile Satellite Corp., Inc. (b)............ 5,900 91,450 Aon Corp............................................. 66,800 3,390,100 Automatic Data Processing, Inc....................... 62,700 2,421,787 Avon Products, Inc................................... 96,200 4,341,025 Bard (C.R.), Inc..................................... 33,100 1,125,400 Beckman Instruments, Inc............................. 21,400 813,200 Biogen, Inc. (b)..................................... 5,000 274,375 Birmingham Steel Corp................................ 21,500 352,063 Boeing Co............................................ 14,200 1,237,175 Boston Technology, Inc. (b).......................... 21,400 361,125 Brinker International, Inc. (b)...................... 15,500 232,500 Brinson Post Venture Fund............................ 423,765 5,722,985 Burlington Northern Santa Fe......................... 61,200 4,949,550 Centerior Energy Co.................................. 45,000 331,875 Chase Manhattan Corp................................. 77,300 5,459,313 CIGNA Corp........................................... 26,500 3,123,687 Citicorp............................................. 79,200 6,543,900 CMS Energy Corp...................................... 58,500 1,806,188 Coca-Cola Enterprises, Inc........................... 51,300 1,776,262 Comerica, Inc........................................ 14,700 655,988 Comverse Technology, Inc. (b)........................ 16,400 500,200 Cooper Cameron Corp. (b)............................. 8,083 353,631 Corning, Inc......................................... 83,600 3,208,150 Dial Corp............................................ 43,800 1,253,775 EMC Corp. /Mass (b).................................. 60,900 1,134,263 Enron Corp........................................... 118,100 4,827,337 Entergy Corp......................................... 16,300 462,513 Federal Express Corp. (b)............................ 6,100 500,200 Federated Department Stores (b)...................... 56,900 1,941,712 FileNet Corp. (b).................................... 8,300 302,950 First Data Corp...................................... 15,989 1,273,124 Food Lion, Inc. Class A.............................. 76,000 603,250 Ford Motor Co........................................ 54,000 1,748,250 Forest Laboratories, Inc. (b)........................ 36,300 1,402,087 Gannett Co., Inc..................................... 35,700 2,525,775 General Instrument Corp. (b)......................... 85,400 2,465,925 Genzyme Corp. (b).................................... 7,000 351,750 Goodyear Tire & Rubber Co............................ 64,200 3,097,650 Health Care and Retirement Corp. (b)................. 28,800 684,000 Honeywell, Inc....................................... 43,200 2,354,400 Inland Steel Industries, Inc......................... 15,100 296,338 Interpublic Group of Companies, Inc.................. 26,600 1,246,875 James River Corp. of Virginia........................ 30,800 812,350 Kimberly-Clark Corp.................................. 48,900 3,777,525 Kroger Co. (b)....................................... 22,500 888,750 Lockheed Martin Corp................................. 75,800 6,367,200 Lyondell Petrochemical Co............................ 58,500 1,411,313 Magna Group, Inc..................................... 9,300 223,200 Manor Care, Inc...................................... 34,950 1,376,156 Mattel, Inc.......................................... 124,675 3,568,822 Melville Corp........................................ 72,700 2,944,350 Nabisco Holdings Corp. Class A....................... 7,200 254,700 National Semiconductor Corp. (b)..................... 62,400 967,200 Nextel Communications, Inc. Class A (b).............. 53,900 1,027,469 Old Republic International Corp...................... 31,050 671,456 Owens Illinois, Inc. (b)............................. 47,800 764,800 Pentair, Inc......................................... 25,200 756,000 Pfizer, Inc.......................................... 3,500 249,813 Philip Morris Companies, Inc......................... 11,400 1,185,600 RJR Nabisco Convertible Preferred "C"................ 174,200 1,132,300 RJR Nabisco Holdings Corp............................ 17,340 537,540 Schering Plough Corp................................. 63,100 3,959,525 Seagate Technology, Inc. (b)......................... 16,600 747,000 Sprint Corp.......................................... 41,700 1,751,400 State Street Boston Corp............................. 12,700 647,700 Timken Co............................................ 14,900 577,375 Transamerica Corp.................................... 14,900 1,218,075 Tyson Foods, Inc. Class A............................ 47,400 1,297,575 Ultramar Corp........................................ 23,400 678,600 US Bancorp........................................... 36,500 1,318,562 USF&G Corp........................................... 48,500 794,187 Westvaco Corp........................................ 12,750 380,906 Whitman Corp......................................... 22,500 542,812 WMX Technologies, Inc................................ 68,000 2,227,000 York International Corp.............................. 7,500 388,125 360 Communications Co. (b)........................... 18,566 445,584 ------------ Total U.S. Equities.................................. 130,830,311 ------------ NON-U.S. EQUITIES -- 15.85% AUSTRALIA -- 0.76% Amcor Ltd............................................ 29,400 200,165 ANZ Banking Group Ltd................................ 33,753 159,932 Boral Ltd............................................ 46,100 119,740 Broken Hill Proprietary Co. Ltd...................... 61,780 854,368 CRA Ltd.............................................. 20,645 317,840 David Jones Ltd...................................... 115,100 159,446 Lend Lease Corp. Ltd................................. 18,056 277,129 M.I.M. Holdings Ltd.................................. 97,900 126,373 National Australia Bank Ltd.......................... 33,947 313,953 News Corp. Ltd....................................... 36,100 204,865 Pacific Dunlop Ltd................................... 47,600 107,151 Qantas Airways Ltd................................... 66,350 112,281 Santos Ltd........................................... 57,800 200,173 WMC Ltd.............................................. 19,100 136,804 Westpac Bank Corp. Ltd............................... 70,138 310,804 ------------ 3,601,024 ------------ BELGIUM -- 0.50% Delhaize-Le Lion S.A................................. 3,500 174,838 Electrabel S.A....................................... 1,960 418,540 Fortis AG............................................ 1,757 230,499 Groupe Bruxelles Lambert S.A......................... 1,150 143,893 Kredietbank NV....................................... 1,120 334,975 Petrofina S.A........................................ 1,055 330,688 Societe Generale de Belgique......................... 1,553 117,731 Solvay S.A. Class A.................................. 390 239,324
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SHARES VALUE ------ ----- BELGIUM (CONTINUED) Tractebel............................................ 505 $ 206,730 Union Miniere Group S.A. (b)......................... 2,320 177,727 ------------ 2,374,945 ------------ CANADA -- 0.59% Alcan Aluminium Ltd.................................. 7,600 231,239 Bank of Montreal..................................... 13,600 332,630 Barrick Gold Corp.................................... 4,400 119,376 Canadian Pacific Ltd................................. 16,900 370,028 Imperial Oil Ltd..................................... 5,900 248,858 Moore Corp. Ltd...................................... 3,900 72,968 Noranda, Inc......................................... 6,300 128,943 Norcen Energy Resources Ltd.......................... 5,800 101,721 Northern Telecom Ltd................................. 3,400 184,864 NOVA Corp............................................ 10,400 94,054 Royal Bank of Canada................................. 9,900 237,423 Seagram Co. Ltd...................................... 6,500 217,761 Thomson Corp......................................... 17,800 281,547 TransCanada Pipelines Ltd............................ 9,700 143,838 ------------ 2,765,250 ------------ FINLAND -- 0.12% Merita Ltd. Class A (b).............................. 22,200 46,350 Outokupu OY Class A.................................. 3,400 57,083 Oy Nokia Ab Class A.................................. 8,700 320,218 UPM-Kymmene Corp. (b)................................ 7,300 151,000 ------------ 574,651 ------------ FRANCE -- 1.57% Accor S.A............................................ 1,940 271,329 Alcatel Alsthom...................................... 2,738 238,804 Banque Nationale de Paris............................ 11,430 401,204 CEP Communications................................... 1,984 167,646 CEP Communications Warrants "97" (b)................. 1,984 5,781 Cie Bancaire S.A..................................... 2,311 260,369 Cie de Saint Gobain.................................. 3,174 424,803 Cie de Suez.......................................... 4,467 163,391 Cie Generale des Eaux................................ 5,026 561,373 Colas................................................ 854 152,950 Credit Local de France............................... 4,859 395,478 Elf Aquitaine S.A.................................... 4,934 362,862 GAN (b).............................................. 1,820 48,788 LVMH................................................. 2,879 682,840 Michelin Class B..................................... 5,960 291,285 Pechiney S.A. Class A................................ 5,604 226,315 Peugeot S.A.......................................... 5,120 685,252 Rhone-Poulenc Class A................................ 11,000 289,103 SEITA................................................ 3,700 169,619 Societe Generale..................................... 4,986 548,189 Total S.A. Class B................................... 8,212 609,041 UAP.................................................. 9,066 184,032 Usinor Sacilor....................................... 17,500 252,404 ------------ 7,392,858 ------------ GERMANY -- 1.03% Allianz AG Holding................................... 288 $ 500,656 BASF AG.............................................. 711 202,496 Bayer AG............................................. 9,780 344,077 Bayerische Motoren Werke AG.......................... 430 248,321 Bayerische Vereinsbank AG............................ 5,794 162,160 Commerzbank AG....................................... 741 153,253 Daimler-Benz AG (b).................................. 438 234,956 Daimler-Benz AG Rights (b)........................... 438 60 Deutsche Bank AG..................................... 11,811 559,473 Hoechst AG........................................... 4,740 160,066 Kaufhof Holding AG................................... 600 226,858 M.A.N. AG............................................ 400 100,256 Mannesmann AG........................................ 1,127 387,982 Muenchener Rueckver AG............................... 171 349,392 Muenchener Rueckver AG Warrants "98" (b)............. 2 248 Preussag AG.......................................... 842 212,146 RWE AG............................................... 5,450 211,970 Schering AG.......................................... 2,085 151,160 Siemens AG........................................... 2,600 139,352 Thyssen AG........................................... 1,250 228,714 Veba AG.............................................. 5,839 310,344 ------------ 4,883,940 ------------ ITALY -- 0.49% Assicurazioni Generali............................... 11,800 272,109 Danieli & Co. Savings (Risp)......................... 26,000 92,436 Edison Spa........................................... 24,000 144,819 ENI ADR (c).......................................... 8,000 400,000 Fiat Spa-Priv........................................ 85,000 149,157 INA-Istituto Nazionale de Assicurazioni.............. 47,000 70,058 Istituto Mobilaire Italiano Spa...................... 30,000 250,497 Italgas Spa.......................................... 33,000 123,243 La Rinascente........................................ 19,000 136,028 La Rinascente Savings (Risp)......................... 9,000 24,952 La Rinascente Warrants "99" (b)...................... 1,400 1,140 Mediobanca Spa....................................... 6,000 38,103 Montedison Spa (b)................................... 105,000 61,029 SAI-Savings (Risp)................................... 16,500 63,935 Telecom Italia Spa................................... 141,000 243,286 Telecom Italia Mobile Spa............................ 167,000 227,685 ------------ 2,298,477 ------------ JAPAN -- 4.78% Amada Co. Ltd........................................ 35,000 376,545 Asahi Glass Co. Ltd.................................. 42,000 501,635 Bank of Tokyo-Mitsubishi Ltd......................... 31,800 737,956 Canon, Inc........................................... 30,000 623,624 Canon Sales Co., Inc................................. 11,000 305,886 Citizen Watch Co. Ltd................................ 32,000 266,372 Dai Nippon Printing Co. Ltd.......................... 32,000 618,519 Daiichi Pharmaceutical Co. Ltd....................... 23,000 354,390 Daikin Industries Ltd................................ 34,000 371,987 Daiwa House Industry Co. Ltd......................... 17,000 263,490
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SHARES VALUE ------ ----- JAPAN (CONTINUED) Fanuc................................................ 13,900 $ 552,546 Fujitsu.............................................. 21,000 191,464 Hitachi Ltd.......................................... 68,000 632,377 Honda Motor Co....................................... 16,000 414,291 Inax................................................. 44,000 437,266 Isetan............................................... 12,000 181,617 Ito Yokado Co. Ltd................................... 16,000 964,247 Kaneka Corp.......................................... 17,000 114,231 Keio Teito Electric Railway.......................... 39,000 231,124 Kinki Nippon Railway................................. 39,000 280,549 Kirin Brewery Co. Ltd................................ 37,000 452,037 Kokuyo............................................... 7,000 193,378 Kuraray Co. Ltd...................................... 30,000 336,429 Maeda Road Construction.............................. 8,000 137,854 Marui Co. Ltd........................................ 5,000 110,775 Matsushita Electric Industrial Co.................... 55,000 1,022,963 Mitsubishi Paper Mills............................... 43,000 268,551 NGK Insulators....................................... 56,000 628,001 Nintendo Corp. Ltd................................... 2,900 215,752 Nippon Denso Co. Ltd................................. 23,000 499,082 Nippon Meat Packers, Inc............................. 22,000 312,906 Nippon Steel Co...................................... 28,000 95,987 Okumura.............................................. 24,000 200,435 Osaka Gas Co......................................... 141,000 515,502 Pioneer Electronic Corp.............................. 5,000 118,981 Sankyo Co. Ltd....................................... 25,000 647,329 Secom................................................ 8,000 528,075 Seino Transportation................................. 12,000 189,275 Sekisui House Ltd.................................... 66,000 752,179 Shinmaywa Industries Ltd............................. 31,000 316,553 Sony Corp............................................ 10,200 670,506 Sumitomo Bank........................................ 36,000 695,834 Sumitomo Electric Industries......................... 28,000 400,797 Takeda Chemical Industries........................... 26,000 459,877 TDK Corp............................................. 6,000 357,763 Tokio Marine & Fire Insurance Co..................... 31,000 412,650 Tokyo Electric Power................................. 14,900 377,657 Tokyo Steel Mfg...................................... 25,000 490,056 Tonen Corp........................................... 25,000 366,972 Toray Industries, Inc................................ 141,000 971,869 Toshiba Corp......................................... 81,000 576,032 Toyo Suisan Kaisha................................... 19,000 232,127 Toyota Motor Corp.................................... 11,000 274,796 Yamazaki Baking Co. Ltd.............................. 17,000 314,639 ------------ 22,563,735 ------------ MALAYSIA -- 0.46% Genting Bhd.......................................... 12,000 93,780 Hume Industries (Malaysia) Bhd....................... 27,000 132,013 Kuala Lumpur Kepong Bhd.............................. 39,500 99,732 Land & General Holdings Bhd.......................... 51,000 125,701 Malayan Banking Bhd.................................. 26,000 250,080 Malaysia International Shipping Bhd (Frgn.).......... 34,000 105,603 Nestle (Malaysia) Bhd................................ 15,000 120,832 Public Bank Bhd (Frgn.).............................. 78,000 215,694 Resorts World Bhd.................................... 13,000 74,503 Sime Darby Bhd....................................... 86,000 237,817 Telekom Malaysia Bhd................................. 38,000 $ 338,089 Tenaga Nasional Bhd.................................. 70,000 294,566 YTL Corp. Bhd........................................ 14,000 72,940 ------------ 2,161,350 ------------ NETHERLANDS -- 1.12% ABN AMRO Holdings NV................................. 9,314 499,831 Akzo Nobel NV........................................ 1,100 131,789 DSM NV............................................... 1,910 189,668 Hoogovens NV......................................... 2,900 107,376 ING Groep NV......................................... 21,985 647,752 KPN NV............................................... 11,855 448,764 Philips Electronics NV............................... 6,480 210,698 Royal Dutch Petroleum Co............................. 6,400 988,365 Royal Dutch Petroleum Co. NY Shares (c).............. 6,100 937,875 Unilever NV.......................................... 4,750 687,357 Vendex International NV.............................. 6,300 219,609 VNU-Ver Ned Uitgevers................................ 14,700 228,221 ------------ 5,297,305 ------------ NEW ZEALAND -- 0.51% Brierley Investments Ltd............................. 385,200 364,168 Carter Holt Harvey Ltd............................... 245,400 559,829 Fletcher Challenge Building.......................... 60,525 118,172 Fletcher Challenge Energy............................ 60,525 133,514 Fletcher Challenge Forest Ltd........................ 16,333 20,253 Fletcher Challenge Paper............................. 121,050 233,857 Telecom Corp. of New Zealand Ltd..................... 198,000 830,143 Telecom Corp. of New Zealand Ltd. ADS (c)............ 2,000 133,500 ------------ 2,393,436 ------------ SPAIN -- 0.56% Banco Bilbao Vizcaya S.A............................. 3,800 153,825 Banco Central Hispanoamericano....................... 5,010 101,989 Banco Intercontinental Espanol S.A................... 1,630 182,183 Banco Popular Espanol S.A............................ 1,190 211,991 Banco Santander S.A.................................. 3,800 177,239 Cia Sevillana de Electricidad........................ 17,200 158,302 Empresa Nacional de Electridad S.A................... 4,800 299,132 Fomento de Construcciones y Contratas S.A............ 1,450 119,881 Iberdrola S.A........................................ 34,900 357,953 Repsol S.A........................................... 4,100 142,465 Repsol S.A. ADR (c).................................. 4,100 142,475 Telefonica de Espana................................. 24,200 445,454 Vallehermosa S.A..................................... 4,000 78,932 Viscofan Envolturas Celulosicas S.A.................. 4,900 77,392 ------------ 2,649,213 ------------ SWITZERLAND -- 0.41% ABB AG (Bearer)...................................... 80 98,945 Ciba-Geigy AG (Reg.)................................. 258 314,358 CS Holdings AG (Reg.)................................ 1,973 187,589 Nestle S.A. (Reg.)................................... 463 528,625 Roche Holding AG (Gen.).............................. 36 274,545
- -------------------------------------------------------------------------------- 12 GLOBAL FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - --------------------------------------------------------------------------------
SHARES VALUE ------ ----- SWITZERLAND (CONTINUED) Schweiz Bankgesellschaft (Bearer)................... 206 $ 201,622 Societe Generale de Surveillance Holding S.A. (Bear- er)................................................ 71 169,898 Zurich Versicherungs (Reg.)......................... 569 155,025 ------------ 1,930,607 ------------ UNITED KINGDOM -- 2.95% Asda Group PLC...................................... 60,200 108,987 Bass PLC............................................ 39,800 500,360 B.A.T. Industries PLC............................... 46,184 359,568 Booker PLC.......................................... 14,100 82,606 British Gas PLC..................................... 167,900 467,041 British Petroleum Co. PLC........................... 96,508 846,601 British Steel PLC................................... 56,000 143,155 British Telecommunications PLC...................... 159,500 857,607 Charter PLC......................................... 19,035 274,506 Coats Viyella PLC................................... 103,300 276,109 FKI PLC............................................. 68,700 181,492 General Electric Co. PLC............................ 174,700 942,050 Glaxo Wellcome PLC.................................. 22,000 296,239 Grand Metropolitan PLC.............................. 95,200 631,708 Guinness PLC........................................ 74,900 544,727 Hanson PLC.......................................... 92,900 260,582 Hillsdown Holdings PLC.............................. 72,200 195,226 House of Fraser PLC................................. 128,800 348,270 Legal & General Group PLC........................... 22,300 231,837 Lloyds Abbey Life PLC............................... 31,300 248,552 Lloyds TSB Group PLC................................ 189,779 928,988 Marks & Spencer PLC................................. 47,000 343,644 Mirror Group PLC.................................... 40,800 129,977 National Power PLC.................................. 37,900 306,263 National Westminster Bank PLC....................... 40,800 390,564 Ocean Group PLC..................................... 28,200 200,270 Peninsular & Oriental Steam Navigation Co........... 32,600 246,210 Reckitt & Colman PLC................................ 28,325 297,555 Redland PLC......................................... 23,200 144,572 RJB Mining PLC...................................... 28,300 243,200 Rolls-Royce PLC..................................... 38,900 135,409 Royal Insurance Holdings PLC........................ 27,366 169,257 RTZ Corp. PLC....................................... 20,100 297,674 Scottish Hydro-Electric PLC......................... 30,900 142,135 Sears PLC........................................... 160,700 247,231 Sedgwick Group PLC.................................. 92,400 198,154 SmithKline Beecham PLC.............................. 33,400 357,357 Tesco PLC........................................... 87,800 401,137 Thames Water PLC.................................... 33,000 290,769 Unilever PLC........................................ 13,400 266,542 Vodafone Group PLC.................................. 45,600 170,070 W.H. Smith Group PLC................................ 29,300 216,278 ------------ 13,920,479 ------------ Total Non-U.S. Equities............................. 74,807,270 ------------ EMERGING MARKETS EQUITIES -- 2.13% Brinson Emerging Markets Equity Fund................ 952,086 $ 10,063,648 ------------ Total Equities (Cost $183,698,296).................. 215,701,229 ------------
FACE AMOUNT VALUE ------------- ------------ Bonds -- 49.64% U.S. BONDS -- 20.14% U.S. CORPORATE BONDS -- 2.97% American Express Credit Account Master Trust 96-1A 6.800%, due 12/15/03............................... $ 1,280,000 $ 1,285,504 Bell South Corp. 9.125%, due 07/01/03............... 209,990 222,475 Choice Credit Card 7.200%, due 03/15/98............. 1,000,000 1,011,210 Chrysler Financial Corp. MTN 6.500%, due 08/21/97... 165,000 165,493 Delta Air Lines 10.060%, due 01/02/16............... 1,000,000 1,155,618 Ford Credit Grantor Trust 95-B 5.900%, due 10/15/00. 159,140 158,539 GMAC MTN 6.500%, due 04/19/99....................... 1,350,000 1,345,167 Green Tree Acceptance Corp. 94-A 6.900%, due 02/15/04........................................... 499,642 494,860 Green Tree Financial 94-2 8.300%, due 05/15/19...... 435,000 446,427 Lehman Brothers Holdings 7.250%, due 04/15/03....... 1,500,000 1,481,769 News America Corp. 7.750%, due 01/20/24............. 1,755,000 1,629,100 Premier Auto Trust 4.220%, due 03/02/99............. 45,500 44,688 Salomon, Inc. 6.750%, due 02/15/03.................. 550,000 526,798 Sears Credit Master Trust II 96-2 6.500%, due 11/15/99........................................... 315,000 315,636 Standard Credit Card Trust 94-1A 4.650%, due 02/07/97........................................... 1,065,000 1,057,087 8.250%, due 01/07/05............................... 500,000 533,075 Thrift Financial Corp. 11.250%, due 01/01/16........ 41,328 45,116 Time Warner Entertainment, Inc. 9.150%, due 02/01/23............................... 990,000 1,024,342 8.375%, due 03/15/23............................... 1,100,000 1,068,206 ------------ 14,011,110 ------------ INTERNATIONAL DOLLAR BONDS -- 2.09% AT&T Corp. 8.250%, due 01/11/00..................... 675,000 704,954 BBV International 7.000%, due 12/01/25.............. 2,200,000 1,984,004
- -------------------------------------------------------------------------------- 13 GLOBAL FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ------ ----- INTERNATIONAL DOLLAR BONDS (CONTINUED) City of Oslo 7.875%, due 02/03/97................... $ 1,200,000 $ 1,213,505 Hanson PLC Notes 6.750%, due 09/15/05............... 790,000 757,574 International Bank for Reconstruction & Development 9.875%, due 10/01/97............................... 175,000 182,836 Japanese Development Bank 8.375%, due 02/15/01...... 1,000,000 1,060,159 Korea Telecom 7.500%, due 06/01/06.................. 1,500,000 1,502,963 Petroliam Nasional 7.125%, due 08/15/05............. 450,000 443,892 Republic of Italy 6.875%, due 09/27/23.............. 150,000 135,188 Republic of South Africa 9.625%, due 12/15/99....... 1,000,000 1,043,750 Royal Bank of Scotland 7.375%, due 04/01/06......... 220,000 214,830 Swedbank FRN 7.718%, due 10/29/49................... 300,000 308,250 Telstra Corp. Ltd. 6.500%, due 11/28/05............. 350,000 332,740 ------------ 9,884,645 ------------ U.S. GOVERNMENT AGENCIES -- 6.02% Federal Home Loan Mortgage Corp. 9.200%, due 08/25/97............................... 200,000 206,826 9.000%, due 03/01/17............................... 446,060 470,045 5.800%, due 08/15/19............................... 2,025,000 1,823,675 Federal Home Loan Mortgage Corp. Gold 9.500%, due 10/01/20............................... 606,366 646,283 8.000%, due 05/01/23............................... 1,937,351 1,954,893 9.000%, due 05/01/24............................... 1,260,700 1,323,256 Federal National Mortgage Association 7.600%, due 01/10/97............................... 200,000 202,012 5.000%, due 06/01/01............................... 1,734,960 1,620,366 7.000%, due 03/01/03............................... 1,250,000 1,245,313 6.220%, due 03/13/06............................... 1,700,000 1,605,191 6.700%, due 08/25/20............................... 2,345,000 2,198,953 9.000%, due 08/01/21............................... 342,544 359,592 6.500%, due 08/25/21............................... 1,500,000 1,382,535 8.200%, due 08/25/21............................... 64,406 65,490 8.000%, due 05/01/22............................... 184,196 185,633 8.500%, due 07/01/22............................... 845,692 875,029 8.500%, due 08/01/23............................... 437,635 449,119 7.500%, due 05/01/25............................... 2,016,015 1,990,170 3.000%, due 03/01/26............................... 1,250,000 1,169,131 6.500%, due 03/01/26............................... 1,246,509 1,165,866 6.500%, due 03/01/26............................... 1,200,000 1,122,366 7.000%, due 03/01/26............................... 745,000 716,825 Federal National Mortgage Association Principal Strips 0.000%, due 11/01/01(e)............................ 225,000 220,476
FACE AMOUNT OR SHARES VALUE ----------- ----- Government National Mortgage Association 11.000%, due 09/15/15.............................. $ 275,347 $ 308,129 8.500%, due 05/15/21............................... 75,654 77,782 8.000%, due 08/15/22............................... 524,840 531,983 8.000%, due 11/15/22............................... 533,079 540,334 8.000%, due 12/15/22............................... 1,820,878 1,845,660 7.500%, due 03/15/26............................... 895,000 881,849 6.500%, due 03/20/26............................... 1,145,028 1,059,500 Tennessee Valley Authority 6.875%, due 12/15/43..... 170,000 150,308 ------------ 28,394,590 ------------ U.S. GOVERNMENT OBLIGATIONS-- 9.06% U.S. Treasury Coupon Strips 0.000%, due 02/15/03............................... 225,000 146,068 0.000%, due 05/15/03............................... 7,000,000 4,462,360 U.S. Treasury Notes and Bonds 6.625%, due 03/31/97............................... 435,000 437,855 5.500%, due 11/15/98............................... 985,000 969,609 6.375%, due 03/31/01............................... 10,805,000 10,754,346 5.750%, due 08/15/03............................... 6,600,000 6,280,309 6.500%, due 05/15/05............................... 5,855,000 5,772,661 8.125%, due 05/15/21............................... 1,155,000 1,301,179 U.S. Treasury Principal Strips 0.000%, due 11/15/04............................... 11,435,000 6,527,441 0.000%, due 05/15/05............................... 7,315,000 4,027,785 0.000%, due 02/15/15............................... 7,630,000 2,062,160 ------------ 42,741,773 ------------ Total U.S. Bonds.................................... 95,032,118 ------------ HIGH YIELD BONDS -- 2.55% Brinson High Yield Fund............................. 1,065,360 12,034,624 ------------ NON-U.S. BONDS -- 23.72% AUSTRALIA -- 1.30% Government of Australia 9.750%, due 03/15/02............................... AUD 3,700,000 3,041,281 9.000%, due 09/15/04............................... 3,900,000 3,101,643 ------------ 6,142,924 ------------ BELGIUM -- 1.09% Kingdom of Belgium 8.750%, due 06/25/02............................... BEF 32,000,000 1,161,049 9.000%, due 03/28/03............................... 54,000,000 1,983,402 8.500%, due 10/01/07............................... 56,000,000 2,007,169 ------------ 5,151,620 ------------ CANADA -- 2.43% Government of Canada 7.500%, due 09/01/00............................... CAD 4,350,000 3,257,276 7.250%, due 06/01/03............................... 2,600,000 1,891,740 4.250%, due 12/01/21 (d)........................... 5,500,000 3,973,613 9.000%, due 06/01/25............................... 2,085,000 1,673,512 4.250%, due 12/01/26 (d)........................... 1,000,000 687,572 ------------ 11,483,713 ------------
- -------------------------------------------------------------------------------- 14 GLOBAL FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - --------------------------------------------------------------------------------
FACE AMOUNT OR SHARES VALUE ----------- ----- DENMARK -- 2.39% Kingdom of Denmark 9.000%, due 11/15/98............................. DKK 2,100,000 $ 388,406 9.000%, due 11/15/00............................. 14,600,000 2,756,854 8.000%, due 05/15/03............................. 12,000,000 2,165,655 7.000%, due 12/15/04............................. 17,500,000 2,952,372 8.000%, due 03/15/06............................. 10,500,000 1,861,829 7.000%, due 11/10/24............................. 7,900,000 1,161,052 ------------ 11,286,168 ------------ FRANCE -- 3.13% Government of France (OAT) 8.500%, due 03/28/00............................. FRF 5,900,000 1,268,019 9.500%, due 01/25/01............................. 8,300,000 1,865,565 8.500%, due 04/25/03............................. 6,500,000 1,429,293 8.250%, due 02/27/04............................. 10,700,000 2,316,878 7.500%, due 04/25/05............................. 22,400,000 4,664,926 8.500%, due 12/26/12............................. 14,500,000 3,250,107 ------------ 14,794,788 ------------ GERMANY -- 5.14% Bundesrepublik Deutscheland 7.000%, due 09/20/99............................. DEM 7,000,000 4,873,004 8.500%, due 08/21/00............................. 2,600,000 1,901,702 8.375%, due 05/21/01............................. 1,900,000 1,393,075 8.000%, due 07/22/02............................. 1,950,000 1,410,134 6.500%, due 07/15/03............................. 4,800,000 3,198,003 6.750%, due 07/15/04............................. 7,800,000 5,234,676 6.250%, due 01/04/24............................. 2,900,000 1,675,678 Treuhandanstalt 7.750%, due 10/01/02............................. 4,650,000 3,318,636 6.250%, due 03/04/04............................. 1,900,000 1,240,411 ------------ 24,245,319 ------------ ITALY -- 2.54% Republic of Italy (BTP) 7.875%, due 10/01/96............................. ITL2,100,000,000 1,371,003 7.437%, due 01/01/99............................. 3,100,000,000 2,035,793 8.312%, due 12/01/99............................. 1,900,000,000 1,277,243 10.062%, due 03/01/03............................ 3,500,000,000 2,556,246 7.875%, due 10/01/03............................. 3,300,000,000 2,163,905 7.437%, due 04/01/04............................. 3,100,000,000 1,968,654 8.312%, due 12/01/07............................. 900,000,000 594,618 ------------ 11,967,462 ------------ NETHERLANDS -- 3.06% Government of Nederlands 6.250%, due 07/15/98............................. NLG 1,400,000 853,829 8.500%, due 03/15/01............................. 1,000,000 659,382 8.750%, due 09/15/01............................. 1,300,000 870,145 6.500%, due 04/15/03............................. 3,100,000 1,870,643 8.500%, due 06/01/06............................. 8,650,000 5,817,681 8.250%, due 02/15/07............................. 4,500,000 2,973,812 7.500%, due 04/15/10............................. 2,200,000 1,376,530 ------------ 14,422,022 ------------ SPAIN -- 1.06% Government of Spain 7.400%, due 07/30/99............................. ESP 510,000,000 $ 3,953,158 11.300%, due 01/15/02............................ 60,000,000 525,915 8.200%, due 02/28/09............................. 70,000,000 514,473 ------------ 4,993,546 ------------ UNITED KINGDOM -- 1.58% UK Treasury 7.000%, due 11/06/01............................. GBP 810,000 1,239,860 8.000%, due 06/10/03............................. 1,400,000 2,216,395 8.500%, due 12/07/05............................. 2,470,000 4,002,714 ------------ 7,458,969 ------------ Total Non-U.S. Bonds.............................. 111,946,531 ------------ EMERGING MARKETS DEBT -- 3.23% Brinson Emerging Markets Debt Fund................ 1,118,170 15,250,052 ------------ Total Bonds (Cost $232,143,982)................... 234,263,325 ------------ Short-Term Investments -- 4.14% U.S. GOVERNMENT OBLIGATIONS-- 0.19% U.S. Treasury Bills 5.140%, due 11/14/96.......... 930,000 911,941 ------------ COMMERCIAL PAPER -- 3.95% Airtouch Communications, Inc. 5.500%, due 07/01/96......................................... 1,000,000 1,000,000 Baxter International, Inc. 5.550%, due 07/10/96... 2,000,000 1,997,225 Dial Corp. 5.550%, due 07/17/96................... 1,000,000 997,533 FMC Corp. 5.480%, due 07/08/96.................... 1,500,000 1,498,402 Gatx Capital Corp. 5.500%, due 07/09/96........... 1,000,000 998,778 Kerr-McGee Credit Corp. 5.500%, due 07/09/96...... 2,000,000 1,997,556 The Limited, Inc. 5.650%, due 07/01/96............ 2,484,000 2,484,000 Lockheed Martin Corp. 5.630%, due 07/01/96........ 2,981,000 2,981,000 Melville Corp. 5.658%, due 07/01/96............... 3,660,000 3,660,000 PS Colorado Credit Corp. 5.550%, due 07/02/96..... 1,000,000 999,846 ------------ 18,614,340 ------------ Total Short-Term Investments (Cost $19,526,281)... 19,526,281 ------------ Total Investments (Cost $435,368,559)--99.48% (a) 469,490,835 ------------ Cash and other assets, less liabilities-- 0.52%.............................. 2,472,301 ------------ Net Assets--100%.................................. $471,963,136 ============
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 15 GLOBAL FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a)Aggregate cost for federal income tax purposes was $435,368,559; and net unrealized appreciation consisted of: Gross unrealized appreciation................................ $39,563,521 Gross unrealized depreciation................................ (5,441,245) ----------- Net unrealized appreciation.............................. $34,122,276 ===========
(b)Non-income producing security. (c)Denominated in U.S. dollars. (d)Linked to Canada's retail price index. Reset semi-annually. (e)Interest rate 0.00% until 11/01/96, 7.99% to maturity. FRN: Floating rate note--The rate disclosed is that in effect at June 30, 1996. MTN: Medium term note FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4) The Global Fund had the following open forward foreign currency contracts as of June 30, 1996:
SETTLEMENT LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) ---------- ------------- ----------- ---------- FORWARD FOREIGN CURRENCY BUY CONTRACTS Belgian Franc................ 12/04/96 15,000,000 $ 483,794 $ 5,094 British Pound................ 12/04/96 2,000,000 3,105,173 68,823 Canadian Dollar.............. 12/04/96 2,500,000 1,836,532 8,331 Danish Kroner................ 12/04/96 11,000,000 1,889,078 29,336 Dutch Guilder................ 12/04/96 5,000,000 2,962,639 27,893 French Franc................. 12/04/96 13,000,000 2,543,507 35,017 German Mark.................. 12/04/96 8,000,000 5,306,672 65,410 Swiss Franc.................. 12/04/96 700,000 566,693 6,693 FORWARD FOREIGN CURRENCY SALE CONTRACTS Australian Dollar............ 12/04/96 9,600,000 7,517,993 4,567 Belgian Franc................ 12/04/96 255,000,000 8,219,394 (85,423) British Pound................ 12/04/96 4,000,000 6,210,346 (178,346) Canadian Dollar.............. 12/04/96 14,500,000 10,651,884 (59,438) Danish Kroner................ 12/04/96 77,000,000 13,223,549 (185,298) Dutch Guilder................ 12/04/96 39,000,000 23,108,586 (167,409) French Franc................. 12/04/96 127,000,000 24,848,107 (309,415) German Mark.................. 12/04/96 53,000,000 35,156,699 (388,921) Japanese Yen................. 12/04/96 2,400,000,000 22,373,469 479,517 Swiss Franc.................. 12/04/96 2,900,000 2,347,726 (18,783) --------- $(662,352) =========
FUTURES CONTRACTS (NOTE 5) The Global Fund had the following open futures contracts as of June 30, 1996:
SETTLEMENT CURRENT UNREALIZED DATE COST/PROCEEDS VALUE GAIN/(LOSS) ---------- ------------- ---------- ----------- INTEREST RATE FUTURES BUY CON- TRACTS 5 Year U.S. Treasury Note, 73 contracts..................... Sept 1996 $7,728,906 $7,719,750 $(9,156) 10 Year U.S. Treasury Note, 44 contracts..................... Sept 1996 4,732,750 4,730,000 (2,750) 30 Year U.S. Treasury Bond, 32 contracts..................... Sept 1996 3,508,000 3,505,000 (3,000) INDEX FUTURES BUY CONTRACTS Topix, 16 contracts............ Sept 1996 2,471,157 2,495,956 24,799 INDEX FUTURES SALE CONTRACTS Standard & Poor's 500, 41 con- tracts........................ Sept 1996 13,937,950 13,874,400 63,550 ------- $73,443 =======
The segregated cash and market value of investments pledged to cover margin requirements for the open futures positions at June 30, 1996 were $550,000 and $911,941, respectively. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 16 GLOBAL FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1996 ASSETS: Investments, at value (Note 1): Unaffiliated issuers (Cost $392,368,559)........................ $426,419,526 Affiliated issuers (Cost $43,000,000)........................... 43,071,309 Cash............................................................. 1,092,698 Foreign currency, at value (Cost $1,860,136)..................... 1,869,053 Receivables: Investment securities sold...................................... 3,805,859 Dividends....................................................... 499,451 Interest........................................................ 4,691,390 Fund shares sold................................................ 217,359 Variation margin (Note 5)....................................... 53,189 Other assets..................................................... 17,720 ------------ TOTAL ASSETS.................................................. 481,737,554 ------------ LIABILITIES: Payables: Investment securities purchased................................. 8,505,363 Fund shares redeemed............................................ 109,118 Investment advisory fees (Note 2)............................... 305,964 Net unrealized depreciation on forward foreign currency con- tracts......................................................... 662,352 Accrued expenses................................................ 191,621 ------------ TOTAL LIABILITIES............................................. 9,774,418 ------------ NET ASSETS........................................................ $471,963,136 ============ NET ASSETS CONSIST OF: Paid in capital (Note 7)......................................... $414,032,614 Accumulated undistributed net investment income.................. 9,848,069 Accumulated net realized gain.................................... 14,638,128 Net unrealized appreciation...................................... 33,444,325 ------------ NET ASSETS.................................................... $471,963,136 ============ OFFERING PRICE PER SHARE: Brinson Class: Net asset value, offering price and redemption price per share (Based on net assets of $457,932,962 and 37,481,925 shares is- sued and outstanding) (Note 7)................................. $ 12.22 ============ SwissKey Class: Net asset value, offering price and redemption price per share (Based on net assets of $14,030,174 and 1,151,524 shares issued and outstanding) (Note 7)...................................... $ 12.18 ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 17 GLOBAL FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1996 INVESTMENT INCOME: Interest......................................................... $15,935,899 Dividends (net of $232,233 for foreign taxes withheld)........... 4,265,925 ----------- TOTAL INCOME.................................................. 20,201,824 ----------- EXPENSES: Advisory (Note 2)................................................ 3,415,057 Administration................................................... 293,601 Custodian........................................................ 146,119 Distribution (Note 6)............................................ 27,501 Other............................................................ 600,604 ----------- TOTAL EXPENSES................................................ 4,482,882 ----------- NET INVESTMENT INCOME ........................................ 15,718,942 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain on: Investments..................................................... 20,797,091 Futures contracts............................................... 1,118,185 Foreign currency transactions................................... 11,661,658 ----------- Net realized gain............................................. 33,576,934 ----------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency................................ 11,972,299 Futures contracts............................................... 73,443 Forward contracts............................................... 1,322,661 Translation of other assets and liabilities denominated in for- eign currency.................................................. (179,797) ----------- Change in net unrealized appreciation or depreciation......... 13,188,606 ----------- Net realized and unrealized gain................................. 46,765,540 ----------- Net increase in net assets resulting from operations............. $62,484,482 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 18 GLOBAL FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
YEAR YEAR ENDED ENDED JUNE 30, 1996 JUNE 30, 1995 ------------- ------------- OPERATIONS: Net investment income............................ $ 15,718,942 $ 14,388,762 Net realized gain................................ 33,576,934 2,567,030 Change in net unrealized appreciation or depreci- ation........................................... 13,188,606 23,779,745 ------------- ------------ Net increase in net assets resulting from opera- tions........................................... 62,484,482 40,735,537 ------------- ------------ DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income......... (20,214,114) (8,427,640) Distributions in excess of net investment income. (1,430,745) -- Distributions from net realized gain............. (10,937,826) (2,567,030) Distributions in excess of net realized gain..... -- (275,888) ------------- ------------ Total distributions to shareholders*............. (32,582,685) (11,270,558) ------------- ------------ CAPITAL SHARE TRANSACTIONS: Shares sold...................................... 109,483,562 124,484,442 Shares issued on reinvestment of distributions... 31,162,315 10,276,565 Shares redeemed.................................. (64,262,463) (77,406,972) ------------- ------------ Net increase in net assets resulting from capital share transactions (Note 7)..................... 76,383,414 57,354,035 ------------- ------------ TOTAL INCREASE IN NET ASSETS.................. 106,285,211 86,819,014 ------------- ------------ NET ASSETS: Beginning of year................................ 365,677,925 278,858,911 ------------- ------------ End of year (including accumulated undistributed net investment income of $9,848,069 and $4,495,172, respectively)........ $471,963,136 $365,677,925 ============= ============ *DISTRIBUTIONS BY CLASS: Distributions from and in excess of net investment income: Brinson Class.................................... $ (21,444,413) $ (8,427,640) SwissKey Class................................... (200,446) -- Distributions from and in excess of net realized gain: Brinson Class.................................... (10,892,522) (2,842,918) SwissKey Class................................... (45,304) -- ------------- ------------ $ (32,582,685) $(11,270,558) ============= ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 19 GLOBAL FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
YEAR YEAR YEAR AUGUST 31, 1992* ENDED ENDED ENDED THROUGH BRINSON CLASS JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994 JUNE 30, 1993 - ------------------------------------------------------------------------------------ Net asset value, begin- ning of period......... $ 11.35 $ 10.43 $ 10.87 $ 10.00 -------- -------- -------- -------- Income from investment operations: Net investment income. 0.44 0.43 0.33 0.26 Net realized and unrealized gain (loss)............... 1.37 0.86 (0.23) 0.81 -------- -------- -------- -------- Total income from investment opera- tions.............. 1.81 1.29 0.10 1.07 -------- -------- -------- -------- Less distributions: Distributions from and in excess of net in- vestment income............... (0.62) (0.27) (0.27) (0.20) Distributions from and in excess of net re- alized gain.......... (0.32) (0.10) (0.27) -- -------- -------- -------- -------- Total distributions. (0.94) (0.37) (0.54) (0.20) -------- -------- -------- -------- Net asset value, end of period................. $ 12.22 $ 11.35 $ 10.43 $ 10.87 ======== ======== ======== ======== Total return (non- annualized)............ 16.38% 12.57% 0.77% 10.76% Ratios/Supplemental data Net assets, end of pe- riod (in 000s)........ $457,933 $365,678 $278,859 $191,389 Ratio of expenses to average net assets: Before expense reim- bursement............ 1.04% 1.09% 1.14% 1.35%** After expense reim- bursement............ N/A N/A 1.10% 1.05%** Ratio of net investment income to average net assets: Before expense reim- bursement............ 3.69% 4.27% 3.21% 3.26%** After expense reim- bursement............ N/A N/A 3.25% 3.56%** Portfolio turnover rate.................. 142% 238% 231% 149% Average commission rate paid per share........ $ 0.0291 N/A N/A N/A
* Commencement of investment operations ** Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 20 GLOBAL FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout the period presented.
JULY 31, 1995* THROUGH SWISSKEY CLASS JUNE 30, 1996 - -------------------------------------------------------------------------------- Net asset value, beginning of period............................. $ 11.60 ------- Income from investment operations: Net investment income.......................................... 0.39 Net realized and unrealized gain............................... 1.10 ------- Total income from investment operations...................... 1.49 ------- Less distributions: Distributions from and in excess of net investment income...... (0.59) Distributions from net realized gain........................... (0.32) ------- Total distributions.......................................... (0.91) ------- Net asset value, end of period................................... $ 12.18 ======= Total return (non-annualized).................................... 13.24% Ratios/Supplemental data Net assets, end of period (in 000s)............................. $14,030 Ratio of expenses to average net assets......................... 1.69%** Ratio of net investment income to average net assets............ 3.04%** Portfolio turnover rate......................................... 142% Average commission rate paid per share.......................... $0.0291
* Commencement of SwissKey Class distribution ** Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 21 GLOBAL EQUITY FUND - -------------------------------------------------------------------------------- LOGO The Global Equity Fund is an actively managed portfolio that provides integrated asset management across and within world equity markets. The investment process is strategic in nature and is driven by deviations of market price from fundamental value. We believe this philosophy offers the greatest potential for achieving enhanced long-term returns, while controlling risk. The Brinson Global Equity Fund has provided an annualized return of 10.42% since January 31, 1994 (performance inception date), compared to the 11.03% return of its benchmark, the MSCI World Equity (Free) Index. For the year ended June 30, 1996, the Fund returned 25.66%, while the benchmark returned 18.92%. For the first half of 1996, the Fund returned 8.91% compared to the Index return of 7.29%. Major global equity markets have provided roughly similar performance year-to- date with the U.S. and Japan offering U.S. dollar hedged returns of 10.92% and 10.23% respectively. The MSCI World Equity (Free) Index provided a hedged return of 10.37%. The U.S. extended its fundamental overvaluation despite slower earnings growth and rising U.S. interest rates. Non-U.S. equity market strength came amid prospects for improved economic activity and a generally stable interest rate environment. Due to the extreme overvaluations of many equity markets, the cash allocation within the Global Equity Fund was expanded from 10% to 15% earlier in 1996. In the first half of the year this risk hedge detracted from Fund performance. The Fund's underweight of the Japanese yen and core-European currencies contributed strongly to Fund performance. The yen suffered not only from a nearly 6.00% depreciation, but also from extremely low short-term interest rates. Core European currencies also depreciated by about 6.00%, but short-term rates were similar to those in the U.S. ------------------------------------------------------------ 22 GLOBAL EQUITY FUND - -------------------------------------------------------------------------------- LOGO TOTAL RETURN
6 months 1 year Annualized ended ended 1/31/94* 6/30/96 6/30/96 to 6/30/96 - ------------------------------------------------------------------------------- BRINSON GLOBAL EQUITY FUND 8.91% 25.66% 10.42% MSCI World Equity (Free) Index (currency unhedged)** 7.29 18.92 11.03 MSCI World Equity (Free) Index (currency hedged)** 10.37 29.51 10.23 - -------------------------------------------------------------------------------
*Performance inception date of the Brinson Global Equity Fund. Total return includes reinvestment of all capital gain and income distributions. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $100,000 This chart shows the growth in the value of an investment in the Brinson Global Equity Fund and the MSCI World Equity (Free) Index (currency unhedged and hedged) if you had invested $100,000 on January 31, 1994, and had reinvested all your income dividends and capital gain distributions through June 30, 1996. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. BRINSON GLOBAL EQUITY FUND VS. MSCI WORLD EQUITY (FREE) INDEX (CURRENCY UNHEDGED AND HEDGED) Wealth Value with Dividends Reinvested [CHART APPEARS HERE] 1/31/94 6/30/96 -------- -------- Brinson Global Equity Fund $100,000 $127,020 MSCI World Equity (Free) Index (currency unhedged) $100,000 $128,777 MSCI World Equity (Free) Index (currency hedged) $100,000 $126,533 Fund returns are net of all fees and costs, while the Index returns are based solely on the market returns without deduction for fees or transaction costs for rebalancing. ------------------------------------------------------------ 23 GLOBAL EQUITY FUND - -------------------------------------------------------------------------------- LOGO MARKET ALLOCATION As of June 30, 1996
Current Benchmark Strategy - --------------------------------- U.S. 41.5% 31.5% Japan 22.3 19.3 Australia 1.6 2.5 Belgium 0.6 1.6 Canada 2.2 1.7 France 3.7 4.9 Germany 3.8 3.3 Hong Kong 1.8 0.0 Italy 1.6 1.7 Malaysia 1.4 1.3 Netherlands 2.3 3.3 New Zealand 0.2 1.6 Spain 1.1 1.7 Sweden 1.2 0.0 Switzerland 3.3 1.2 U.K. 9.0 9.1 Other Markets 2.4 0.3 Cash Reserves 0.0 15.0 - --------------------------------- 100.0% 100.0%
TOP TEN U.S. EQUITY HOLDINGS As of June 30, 1996
Percent of Net Assets - ---------------------- 1. Citicorp 1.99% 2. Lockheed Martin Corp. 1.94 3. Chase Manhattan Corp. 1.66 4. Burlington Northern Santa Fe 1.51 5. Enron Corp. 1.47 6. Avon Products, Inc. 1.32 7. Schering Plough Corp. 1.20 8. Kimberly- Clark Corp. 1.16 9. Mattel, Inc. 1.09 10. Aon Corp. 1.03 - ----------------------
CURRENCY ALLOCATION As of June 30, 1996
Current Benchmark Strategy - --------------------------------- U.S. 41.5% 74.5% Japan 22.3 4.3 Australia 1.6 1.6 Belgium 0.6 0.0 Canada 2.2 2.2 France 3.7 0.0 Germany 3.8 0.0 Hong Kong 1.8 0.0 Italy 1.6 3.4 Malaysia 1.4 1.3 Netherlands 2.3 0.0 New Zealand 0.2 1.6 Spain 1.1 1.7 Sweden 1.2 0.0 Switzerland 3.3 0.0 U.K. 9.0 9.1 Other Markets 2.4 0.3 - --------------------------------- 100.0% 100.0%
TOP TEN NON-U.S. EQUITY HOLDINGS As of June 30, 1996
Percent of Net Assets - ----------------------- 1. Royal Dutch Petroleum Co. 0.87% 2. Matsushita Electric Industrial Co. 0.84 3. Ito Yokado Co. Ltd. 0.80 4. Toray Industries, Inc. 0.79 5. General Electric Co. PLC 0.61 6. Lloyds TSB Group PLC 0.61 7. Sekisui House Ltd. 0.61 8. Sumitomo Bank 0.58 9. Telecom Corp of New Zealand Ltd. 0.57 10. Bank of Tokyo- Mitsubishi Ltd. 0.56 - -----------------------
------------------------------------------------------------ 24 GLOBAL EQUITY FUND - -------------------------------------------------------------------------------- LOGO INDUSTRY DIVERSIFICATION As a Percent of Net Assets As of June 30, 1996 - -------------------------------------------------------------------------------- U.S. EQUITIES Basic Industries Chemicals............................................................... 0.32% Housing/Paper........................................................... 1.43 Metals.................................................................. 0.14 ----- 1.89 Capital Investments Capital Goods........................................................... 3.56 Technology.............................................................. 1.60 ----- 5.16 Consumer Autos/Durables.......................................................... 0.40 Discretionary........................................................... 2.82 Health: Drugs........................................................... 2.92 Health: Non-Drugs....................................................... 1.47 Non-Durables............................................................ 4.18 Retail/Apparel.......................................................... 1.72 ----- 13.51 Energy................................................................... 2.06 Financial Banks................................................................... 4.36 Non-Banks............................................................... 3.93 ----- 8.29 Services................................................................. 2.56 Transportation........................................................... 1.92 Utilities................................................................ 1.57 Miscellaneous............................................................ 1.05 ----- Total U.S. Equities................................................... 38.01* -----
- ------------------------------------------------------------ NON-U.S. EQUITIES Aerospace & Military.................................................... 0.13% Airlines................................................................ 0.07 Appliances & Household Durables......................................... 1.66 Automobiles............................................................. 1.63 Banking................................................................. 6.10 Beverages & Tobacco..................................................... 1.38 Broadcasting & Publishing............................................... 0.64 Building Materials...................................................... 0.89 Business & Public Service............................................... 2.02 Chemicals............................................................... 2.38 Construction............................................................ 1.30 Data Processing......................................................... 0.67 Electric Components..................................................... 0.84 Electronics............................................................. 2.31 Energy.................................................................. 4.29 Financial Services...................................................... 0.59 Food & House Products................................................... 2.45 Forest Products......................................................... 1.07 Gold Mining............................................................. 0.07 Health & Personal Care.................................................. 1.98 Industrial Components................................................... 1.46 Insurance............................................................... 1.96 Leisure & Tourism....................................................... 0.55 Machinery & Engineering................................................. 0.97 Merchandising........................................................... 2.62 Metals.................................................................. 0.32 Miscellaneous Materials................................................. 0.88 Multi-Industry.......................................................... 2.00 Non-Ferrous Metal....................................................... 1.02 Real Estate............................................................. 0.20 Recreation.............................................................. 0.41 Shipping................................................................ 0.34 Steel................................................................... 0.71 Telecommunications...................................................... 2.06 Textiles & Apparel...................................................... 0.16 Transportation.......................................................... 0.58 Utilities............................................................... 2.94 ------ Total Non-U.S. Equities.............................................. 51.65* ------ SHORT-TERM INVESTMENTS.................................................. 10.12* ------ TOTAL INVESTMENTS.................................................... 99.78 CASH AND OTHER ASSETS, LESS LIABILITIES................................. 0.22 ------ NET ASSETS........................................................... 100.00% ======
* The Fund held a short position in stock index futures on June 30, 1996 which reduced U.S. equity exposure from 38.01% to 31.26%. The Fund held a long position in Topix futures which increased Japanese equity exposure from 1.25% to 2.03%. These two adjustments result in a net increase in the Fund's exposure to Short-Term Investments from 10.12% to 16.09%. ------------------------------------------------------------ 25 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - --------------------------------------------------------------------------------
SHARES VALUE ------ ----- Equities -- 89.66% U.S. EQUITIES -- 38.01% Aetna Life & Casualty Co................................. 6,000 $ 429,000 Allergan, Inc............................................ 10,000 392,500 Allstate Corp............................................ 5,700 260,063 Alza Corp. (b)........................................... 9,800 268,275 American Mobile Satellite Corp., Inc. (b)................ 1,100 17,050 Aon Corp................................................. 12,200 619,150 Automatic Data Processing, Inc........................... 11,500 444,187 Avon Products, Inc....................................... 17,600 794,200 Bard (C.R.), Inc......................................... 6,100 207,400 Beckman Instruments, Inc................................. 3,900 148,200 Biogen, Inc. (b)......................................... 900 49,388 Birmingham Steel Corp.................................... 3,900 63,862 Boeing Co................................................ 2,600 226,525 Boston Technology, Inc. (b).............................. 3,900 65,813 Brinker International, Inc. (b).......................... 2,800 42,000 Burlington Northern Santa Fe............................. 11,200 905,800 Centerior Energy Co...................................... 8,200 60,475 Chase Manhattan Corp..................................... 14,100 995,812 CIGNA Corp............................................... 4,900 577,588 Citicorp................................................. 14,500 1,198,063 CMS Energy Corp.......................................... 10,700 330,363 Coca-Cola Enterprises, Inc............................... 9,400 325,475 Comerica, Inc............................................ 2,700 120,488 Comverse Techonology, Inc. (b)........................... 3,000 91,500 Cooper Cameron Corp. (b)................................. 1,500 65,625 Corning, Inc............................................. 15,300 587,138 Dial Corp................................................ 8,000 229,000 EMC Corp./Mass (b)....................................... 11,100 206,737 Enron Corp............................................... 21,600 882,900 Entergy Corp............................................. 3,000 85,125 Federal Express Corp. (b)................................ 800 65,600 Federated Department Stores (b).......................... 10,300 351,488 FileNet Corp. (b)........................................ 1,500 54,750 First Data Corp.......................................... 2,902 231,072 Food Lion, Inc. Class A.................................. 13,900 110,331 Ford Motor Co............................................ 9,900 320,512 Forest Laboratories, Inc. (b)............................ 6,700 258,788 Gannett Co., Inc......................................... 6,500 459,875 General Instrument Corp. (b)............................. 15,700 453,337 Genzyme Corp. (b)........................................ 1,300 65,325 Goodyear Tire & Rubber Co................................ 11,700 564,525 Health Care and Retirement Corp. (b)..................... 5,250 124,688 Honeywell, Inc........................................... 7,900 430,550 Inland Steel Industries, Inc............................. 3,300 64,762 Interpublic Group of Companies, Inc...................... 4,900 229,688 James River Corp. of Virginia............................ 5,600 147,700 Kimberly-Clark Corp...................................... 9,000 695,250 Kroger Co. (b)........................................... 4,100 161,950 Lockheed Martin Corp..................................... 13,900 1,167,600 Lyondell Petrochemical Co................................ 10,700 258,138 Magna Group, Inc......................................... 1,900 45,600 Manor Care, Inc.......................................... 6,400 252,000 Mattel, Inc.............................................. 22,850 654,081 Melville Corp............................................ 13,300 538,650 Nabisco Holdings Corp. Class A........................... 3,400 105,400 National Semiconductor Corp. (b)......................... 11,400 176,700 Nextel Communications, Inc. Class A (b).................. 9,900 188,719 Old Republic International Corp.......................... 5,650 122,181 Owens Illinois, Inc. (b)................................. 8,700 139,200 Pentair, Inc............................................. 4,600 138,000 Pfizer, Inc.............................................. 600 42,825 Philip Morris Companies, Inc............................. 2,100 218,400 RJR Nabisco Convertible Preferred "C".................... 31,900 207,350 RJR Nabisco Holdings Corp................................ 1,200 42,450 Schering Plough Corp..................................... 11,500 721,625 Seagate Technology, Inc. (b)............................. 3,000 135,000 Sprint Corp.............................................. 7,600 319,200 State Street Boston Corp................................. 2,300 117,300 Timken Co................................................ 2,700 104,625 Transamerica Corp........................................ 2,700 220,725 Tyson Foods, Inc. Class A................................ 8,100 221,737 Ultramar Corp............................................ 4,300 124,700 US Bancorp............................................... 6,700 242,037 USF&G Corp............................................... 8,900 145,737 Westvaco Corp............................................ 2,350 70,206 Whitman Corp............................................. 4,100 98,912 WMX Technologies, Inc.................................... 12,400 406,100 York International Corp.................................. 1,400 72,450 360 Communications Co. (b)............................... 3,433 82,392 ----------- Total U.S. Equities...................................... 22,859,933 ----------- NON-U.S. EQUITIES -- 51.65% AUSTRALIA -- 2.22% Amcor Ltd................................................ 10,100 68,764 ANZ Banking Group Ltd.................................... 13,447 63,716 Boral Ltd................................................ 13,800 35,844 Broken Hill Proprietary Co. Ltd.......................... 23,450 324,295 CRA Ltd.................................................. 8,062 124,119 David Jones Ltd.......................................... 37,000 51,255 Lend Lease Corp. Ltd..................................... 6,197 95,113 M.I.M. Holdings Ltd...................................... 29,200 37,692 National Australia Bank Ltd.............................. 14,475 133,870 News Corp. Ltd........................................... 14,500 82,287 Pacific Dunlop Ltd....................................... 17,600 39,619 Qantas Airways Ltd....................................... 23,119 39,123 Santos Ltd............................................... 22,000 76,190 WMC Ltd.................................................. 7,300 52,287 Westpac Bank Corp. Ltd................................... 24,545 108,767 ----------- 1,332,941 ----------- BELGIUM -- 1.55% Delhaize-Le Lion S.A..................................... 1,200 59,945 Electrabel S.A........................................... 850 181,510 Fortis AG................................................ 580 76,089 Groupe Bruxelles Lambert S.A............................. 530 66,316 Kredietbank NV........................................... 465 139,075 Petrofina S.A............................................ 410 128,514 Societe Generale de Belgique............................. 540 40,936 Solvay S.A. Class A...................................... 165 101,252
- -------------------------------------------------------------------------------- 26 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - --------------------------------------------------------------------------------
SHARES VALUE ------ ----- BELGIUM (CONTINUED) Tractebel................................................ 200 $ 81,873 Union Miniere Group S.A. (b)............................. 720 55,157 ----------- 930,667 ----------- CANADA -- 1.77% Alcan Aluminium Ltd...................................... 2,800 85,193 Bank of Montreal......................................... 5,500 134,520 Barrick Gold Corp........................................ 1,600 43,409 Canadian Pacific Ltd..................................... 6,500 142,318 Imperial Oil Ltd......................................... 2,500 105,448 Moore Corp. Ltd.......................................... 1,200 22,452 Noranda, Inc............................................. 2,100 42,981 Norcen Energy Resources Ltd.............................. 2,500 43,845 Northern Telecom Ltd..................................... 1,400 76,120 NOVA Corp................................................ 4,300 38,888 Royal Bank of Canada..................................... 3,500 83,938 Seagram Co. Ltd.......................................... 2,400 80,404 Thomson Corp............................................. 6,500 102,812 TransCanada Pipelines Ltd................................ 4,000 59,315 ----------- 1,061,643 ----------- FINLAND -- 0.29% Merita Ltd. Class A (b).................................. 6,700 13,989 Nokia Ab Class A......................................... 2,600 95,697 Outokumpu Class A........................................ 1,000 16,789 UPM-Kymmene Corp. (b).................................... 2,200 45,507 ----------- 171,982 ----------- FRANCE -- 4.72% Accor S.A................................................ 860 120,280 Alcatel Alsthom.......................................... 1,044 91,056 Banque Nationale de Paris................................ 3,780 132,682 CEP Communications....................................... 704 59,487 CEP Communications Warrants "97" (b)..................... 704 2,051 Cie Bancaire S.A......................................... 992 111,764 Cie de Saint Gobain...................................... 1,328 177,737 Cie de Suez.............................................. 1,651 60,389 Cie Generale des Eaux.................................... 1,934 216,016 Colas.................................................... 330 59,103 Credit Local de France................................... 1,803 146,748 Elf Aquitaine S.A........................................ 1,950 143,409 GAN (b).................................................. 650 17,424 LVMH..................................................... 1,130 268,013 Michelin Class B......................................... 2,410 117,785 Pechiney S.A. Class A.................................... 1,985 80,163 Peugeot S.A.............................................. 1,990 266,338 Rhone-Poulenc Class A.................................... 4,300 113,013 SEITA.................................................... 1,200 55,012 Societe Generale......................................... 1,861 204,609 Total S.A. Class B....................................... 3,090 229,169 UAP...................................................... 3,219 65,343 Usinor Sacilor........................................... 7,200 103,846 ----------- 2,841,437 ----------- GERMANY -- 3.18% Allianz AG Holding....................................... 105 182,531 BASF AG.................................................. 290 82,593 Bayer AG................................................. 4,300 151,281 Bayerische Motoren Werke AG.............................. 170 98,174 Bayerische Vereinsbank AG................................ 2,000 55,975 Commerzbank AG........................................... 330 68,250 Daimler-Benz AG (b)...................................... 160 85,829 Daimler-Benz AG Rights (b)............................... 160 22 Deutsche Bank AG......................................... 4,650 220,265 Hoechst AG............................................... 1,700 57,408 Kaufhof Holding AG....................................... 305 115,319 M.A.N. AG................................................ 100 25,064 Mannesmann AG............................................ 430 148,032 Muenchener Rueckver AG................................... 57 116,464 Muenchener Rueckver AG Warrants "98" (b)................. 3 373 Preussag AG.............................................. 310 78,106 RWE AG................................................... 2,200 85,566 Schering AG.............................................. 850 61,624 Siemens AG............................................... 900 48,237 Thyssen AG............................................... 500 91,485 Veba AG.................................................. 2,650 140,848 ----------- 1,913,446 ----------- ITALY -- 1.38% Assicurazioni Generali................................... 4,200 96,853 Danieli & Co. Savings (Risp)............................. 8,000 28,442 Edison Spa............................................... 9,000 54,307 ENI ADR (c).............................................. 2,300 115,000 Fiat Spa-Priv............................................ 31,000 54,398 INA-Istituto Nazionale de Assicurazioni.................. 14,000 20,868 Istituto Mobilaire Italiano Spa.......................... 11,000 91,849 Italgas Spa.............................................. 13,000 48,550 La Rinascente............................................ 5,000 35,797 La Rinascente Savings (Risp)............................. 6,000 16,635 La Rinascente Warrants "99" (b).......................... 550 448 Mediobanca Spa........................................... 2,800 17,781 Montedison Spa (b)....................................... 44,000 25,574 SAI-Savings (Risp)....................................... 7,000 27,124 Telecom Italia Spa....................................... 61,000 105,251 Telecom Italia Mobile Spa................................ 67,000 91,347 ----------- 830,224 ----------- JAPAN -- 18.58% Amada Co. Ltd............................................ 18,000 193,652 Asahi Glass Co. Ltd...................................... 21,000 250,817 Bank of Tokyo-Mitsubishi Ltd............................. 14,600 339,438 Canon, Inc............................................... 15,000 311,812 Canon Sales Co., Inc..................................... 5,000 139,039 Citizen Watch Co. Ltd.................................... 16,000 133,186 Dai Nippon Printing Co. Ltd.............................. 16,000 309,259 Daiichi Pharmaceutical Co. Ltd........................... 11,000 169,491 Daikin Industries Ltd.................................... 17,000 185,993 Daiwa House Industry Co. Ltd............................. 9,000 139,495 Fanuc.................................................... 6,700 266,335
- -------------------------------------------------------------------------------- 27 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - --------------------------------------------------------------------------------
SHARES VALUE ------ ----- JAPAN (CONTINUED) Fujitsu.................................................. 10,000 $ 91,173 Hitachi Ltd.............................................. 33,000 306,889 Honda Motor Co........................................... 8,000 207,145 Inax..................................................... 21,000 208,695 Isetan................................................... 6,000 90,808 Ito Yokado Co. Ltd....................................... 8,000 482,124 Kaneka Corp.............................................. 9,000 60,475 Keio Teito Electric Railway.............................. 19,000 112,599 Kinki Nippon Railway..................................... 19,000 136,678 Kirin Brewery Co. Ltd.................................... 18,000 219,910 Kokuyo................................................... 4,000 110,502 Kuraray Co. Ltd.......................................... 15,000 168,214 Maeda Road Construction.................................. 3,000 51,695 Marui Co. Ltd............................................ 2,000 44,310 Matsushita Electric Industrial Co........................ 27,000 502,182 Mitsubishi Paper Mills................................... 21,000 131,153 NGK Insulators........................................... 27,000 302,786 Nintendo Corp. Ltd....................................... 1,500 111,596 Nippon Denso Co. Ltd..................................... 12,000 260,391 Nippon Meat Packers, Inc................................. 11,000 156,453 Nippon Steel Co.......................................... 14,000 47,994 Okumura.................................................. 12,000 100,218 Osaka Gas Co............................................. 68,000 248,611 Pioneer Electronic Corp.................................. 3,000 71,389 Sankyo Co. Ltd........................................... 12,000 310,718 Secom.................................................... 4,000 264,037 Seino Transportation..................................... 6,000 94,638 Sekisui House Ltd........................................ 32,000 364,693 Shinmaywa Industries Ltd................................. 15,000 153,171 Sony Corp................................................ 5,000 328,679 Sumitomo Bank............................................ 18,000 347,917 Sumitomo Electric Industries............................. 14,000 200,397 Takeda Chemical Industries............................... 13,000 229,939 TDK Corp................................................. 4,000 238,509 Tokio Marine & Fire Insurance Co......................... 16,000 212,981 Tokyo Electric Power..................................... 7,300 185,027 Tokyo Steel Mfg.......................................... 12,500 245,028 Tonen Corp............................................... 13,000 190,825 Toray Industries, Inc.................................... 69,000 475,596 Toshiba Corp............................................. 40,000 284,460 Toyo Suisan Kaisha....................................... 9,000 109,955 Toyota Motor Corp........................................ 5,000 124,907 Yamazaki Baking Co. Ltd.................................. 8,000 148,065 ----------- 11,172,049 ----------- MALAYSIA -- 1.25% Genting Bhd.............................................. 3,000 23,445 Hume Industries (Malaysia) Bhd........................... 8,000 39,115 Kuala Lumpur Kepong Bhd.................................. 25,000 63,121 Land & General Holdings Bhd.............................. 18,000 44,365 Malayan Banking Bhd...................................... 9,600 92,337 Malaysia International Shipping Bhd (Frgn.).............. 10,000 31,060 Nestle (Malaysia) Bhd.................................... 4,000 32,222 Public Bank Bhd (Frgn.).................................. 23,000 63,602 Resorts World Bhd........................................ 4,000 22,924 Sime Darby Bhd........................................... 31,000 85,725 Telekom Malaysia Bhd..................................... 14,000 124,559 Tenaga Nasional Bhd...................................... 26,000 109,410 YTL Corp. Bhd............................................ 4,000 20,840 ----------- 752,725 ----------- NETHERLANDS -- 3.27% ABN AMRO Holdings NV..................................... 3,454 185,357 Akzo Nobel NV............................................ 300 35,942 DSM NV................................................... 680 67,526 Hoogovens NV............................................. 900 33,324 ING Groep NV............................................. 8,122 242,199 KPN NV................................................... 4,493 170,044 Philips Electronics NV................................... 2,850 92,668 Royal Dutch Petroleum Co................................. 3,400 525,069 Royal Dutch Petroleum Co. NY Shares (c).................. 1,200 184,500 Unilever NV.............................................. 1,750 253,237 Vendex International NV.................................. 2,400 83,661 VNU-Ver Ned Uitgevers.................................... 6,000 93,151 ----------- 1,966,678 ----------- NEW ZEALAND -- 1.67% Brierley Investments Ltd................................. 201,000 190,025 Carter Holt Harvey Ltd................................... 90,500 206,457 Fletcher Challenge Building.............................. 22,750 44,418 Fletcher Challenge Energy................................ 22,550 49,744 Fletcher Challenge Forest Ltd............................ 7,803 9,675 Fletcher Challenge Paper................................. 45,500 87,902 Telecom Corp. of New Zealand Ltd......................... 82,000 343,797 Telecom Corp. of New Zealand Ltd. ADS (c)................ 1,100 73,425 ----------- 1,005,443 ----------- SPAIN -- 1.61% Banco Bilbao Vizcaya S.A................................. 1,800 72,864 Banco Central Hispanoamericano........................... 800 16,286 Banco Intercontinental Espanol S.A....................... 600 67,061 Banco Popular Espanol S.A................................ 400 71,258 Banco Santander S.A...................................... 1,600 74,627 Cia Sevillana de Electricidad............................ 6,300 57,983 Empresa Nacional de Electridad S.A....................... 2,050 127,754 Fomento de Construcciones y Contratas S.A........................................... 500 41,338 Iberdrola S.A............................................ 13,000 133,335 Repsol S.A............................................... 2,600 90,343 Telefonica de Espana..................................... 8,600 158,302 Vallehermosa S.A......................................... 1,200 23,680 Viscofan Envolturas Celulosicas S.A...................... 2,300 36,327 ----------- 971,158 ----------- SWITZERLAND -- 1.31% ABB AG (Bearer).......................................... 30 37,105 Ciba-Geigy AG (Reg.)..................................... 95 115,752 CS Holdings AG (Reg.).................................... 696 66,174 Nestle S.A. (Reg.)....................................... 213 243,190 Roche Holding AG (Gen.).................................. 18 137,272
- -------------------------------------------------------------------------------- 28 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - --------------------------------------------------------------------------------
SHARES VALUE ------ ----- SWITZERLAND (CONTINUED) Schweiz Bankgesellschaft (Bearer)......................... 72 $ 70,470 Societe Generale de Surveillance Holding S.A. (Bearer).... 27 64,609 Zurich Versicherungs (Reg.)............................... 203 55,308 ----------- 789,880 ----------- UNITED KINGDOM -- 8.85% Asda Group PLC............................................ 26,000 47,071 Bass PLC.................................................. 12,800 160,920 B.A.T. Industries PLC..................................... 21,000 163,497 Booker PLC................................................ 6,500 38,081 British Gas PLC........................................... 61,500 171,072 British Petroleum Co. PLC................................. 33,835 296,812 British Steel PLC......................................... 52,000 132,929 British Telecommunications PLC............................ 58,700 315,621 Charter PLC............................................... 7,431 107,163 Coats Viyella PLC......................................... 35,000 93,551 FKI PLC................................................... 30,875 81,566 General Electric Co. PLC.................................. 68,100 367,221 Glaxo Wellcome PLC........................................ 11,500 154,852 Grand Metropolitan PLC.................................... 38,000 252,152 Guinness PLC.............................................. 28,300 205,818 Hanson PLC................................................ 35,000 98,174 Hillsdown Holdings PLC.................................... 25,000 67,599 House of Fraser PLC....................................... 47,000 127,086 Legal & General Group PLC................................. 7,700 80,051 Lloyds Abbey Life PLC..................................... 10,500 83,380 Lloyds TSB Group PLC...................................... 74,630 365,321 Marks & Spencer PLC....................................... 15,500 113,329 Mirror Group PLC.......................................... 16,000 50,971 National Power PLC........................................ 12,000 96,970 National Westminster Bank PLC............................. 17,800 170,393 Ocean Group PLC........................................... 11,500 81,671 Peninsular & Oriental Steam Navigation Co................. 12,000 90,629 Reckitt & Colman PLC...................................... 10,500 110,303 Redland PLC............................................... 6,500 40,505 RJB Mining PLC............................................ 10,000 85,936 Rolls-Royce PLC........................................... 22,400 77,974 Royal Insurance Holdings PLC.............................. 11,900 73,601 RTZ Corp. PLC............................................. 8,200 121,439 Scottish Hydro-Electric PLC............................... 9,200 42,319 Sears PLC................................................. 52,000 80,000 Sedgwick Group PLC........................................ 37,000 79,347 SmithKline Beecham PLC.................................... 11,900 127,322 Tesco PLC................................................. 34,000 155,338 Thames Water PLC.......................................... 10,000 88,112 Unilever PLC.............................................. 5,500 109,402 Vodafone Group PLC........................................ 13,600 50,723 W.H. Smith Group PLC...................................... 9,000 66,434 ----------- 5,322,655 ----------- Total Non-U.S. Equities................................... 31,062,928 ----------- Total Equities (Cost $48,067,795)......................... 53,922,861 -----------
FACE AMOUNT VALUE ------ ----- Short-Term Investments --10.12% U.S. GOVERNMENT OBLIGATIONS -- 0.37% U.S. Treasury Bills 5.140%, due 11/14/96................ $ 225,000 $ 220,631 ----------- COMMERCIAL PAPER -- 9.75% Baxter International, Inc. 5.550%, due 07/10/96................................... 300,000 299,584 FMC Corp. 5.480%, due 07/08/96.......................... 250,000 249,733 Gatx Capital Corp. 5.500%, due 07/09/96................. 750,000 749,083 Kerr-McGee Credit Corp. 5.500%, due 07/09/96................................... 1,000,000 998,778 The Limited, Inc. 5.650%, due 07/01/96.................. 1,065,000 1,065,000 Lockheed Martin Corp. 5.630%, due 07/01/96................................... 1,000,000 1,000,000 Melville Corp. 5.650%, due 07/01/96..................... 1,000,000 1,000,000 PS Colorado Credit Corp. 5.550%, due 07/02/96................................... 500,000 499,923 ----------- 5,862,101 ----------- Total Short-Term Investments (Cost $6,082,732)...................................... 6,082,732 ----------- Total Investments (Cost $54,150,527) -- 99.78% (a)....................... 60,005,593 ----------- Cash and other assets, less liabilities --0.22%......... 132,489 ----------- Net Assets -- 100%...................................... $60,138,082 ===========
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 29 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a)Aggregate cost for federal income tax purposes was $54,150,527; and net unrealized appreciation consisted of: Gross unrealized appreciation................................ $ 7,101,995 Gross unrealized depreciation................................ (1,246,929) ----------- Net unrealized appreciation.............................. $ 5,855,066 ===========
(b)Non-income producing security (c)Denominated in U.S. dollars FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4) The Global Equity Fund had the following open forward foreign currency contracts as of June 30, 1996:
SETTLEMENT LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) ---------- ------------- ---------- ----------- FORWARD FOREIGN CURRENCY BUY CONTRACTS Canadian Dollar............. 12/04/96 430,000 $ 315,883 $ 1,714 Italian Lira................ 12/04/96 1,620,000,000 1,037,810 12,202 FORWARD FOREIGN CURRENCY SALE CONTRACTS Australian Dollar........... 12/04/96 620,000 485,537 5,193 Belgian Franc............... 12/04/96 28,000,000 902,522 (10,688) Dutch Guilder............... 12/04/96 3,300,000 1,955,342 (20,085) French Franc................ 12/04/96 13,750,000 2,690,248 (39,748) German Mark................. 12/04/96 2,600,000 1,724,668 (23,432) Japanese Yen................ 12/04/96 840,000,000 7,830,714 88,584 Swiss Franc................. 12/04/96 900,000 728,605 (9,984) -------- Total................... $ 3,756 ========
FUTURES CONTRACTS (NOTE 5) INDEX FUTURES CONTRACTS: The Global Equity Fund had the following open index futures contracts as of June 30, 1996:
SETTLEMENT CURRENT UNREALIZED DATE COST/PROCEEDS VALUE GAIN ---------- ------------- ---------- ---------- INDEX FUTURES BUY CONTRACTS Topix, 3 contracts.............. Sept 1996 $ 459,695 $ 467,992 $ 8,297 INDEX FUTURES SALE CONTRACTS Standard & Poor's 500, 12 con- tracts......................... Sept 1996 4,079,400 4,060,800 18,600 ------- Total........................ $26,897 =======
The segregated cash and market value of investments pledged to cover margin requirements for the open futures positions at June 30, 1996 was $100,200 and $220,631, respectively. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 30 GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1996 ASSETS: Investments, at value (Cost $54,150,527) (Note 1)................. $60,005,593 Cash.............................................................. 169,435 Foreign currency, at value (Cost $437,680)........................ 440,249 Receivables: Investment securities sold....................................... 218,470 Dividends........................................................ 147,249 Fund shares sold................................................. 2,862 Net unrealized appreciation on forward foreign currency con- tracts.......................................................... 3,756 Other assets...................................................... 6,965 ----------- TOTAL ASSETS................................................... 60,994,579 ----------- LIABILITIES: Payables: Investment securities purchased.................................. 663,419 Variation margin (Note 5)........................................ 14,203 Investment advisory fees (Note 2)................................ 35,761 Accrued expenses................................................. 143,114 ----------- TOTAL LIABILITIES.............................................. 856,497 ----------- NET ASSETS......................................................... $60,138,082 =========== NET ASSETS CONSIST OF: Paid in capital (Note 7).......................................... $49,837,041 Accumulated undistributed net investment income................... 90,547 Accumulated net realized gain..................................... 4,320,936 Net unrealized appreciation....................................... 5,889,558 ----------- NET ASSETS..................................................... $60,138,082 =========== OFFERING PRICE PER SHARE: Brinson Class: Net asset value, offering price and redemption price per share (Based on net assets of $27,126,163 and 2,343,988 shares issued and outstanding) (Note 7)....................................... $ 11.57 =========== SwissKey Class: Net asset value, offering price and redemption price per share (Based on net assets of $33,011,919 and 2,852,778 shares issued and outstanding) (Note 7)....................................... $ 11.57 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 31 GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1996 INVESTMENT INCOME: Dividends (net of $82,247 for foreign taxes withheld)............. $1,003,890 Interest.......................................................... 139,095 ---------- TOTAL INCOME................................................... 1,142,985 ---------- EXPENSES: Advisory (Note 2)................................................. 390,824 Distribution (Note 6)............................................. 191,849 Accounting........................................................ 104,928 Custodian......................................................... 80,000 Professional...................................................... 75,874 Transfer agent.................................................... 64,499 Printing.......................................................... 63,644 Other............................................................. 87,389 ---------- TOTAL EXPENSES................................................. 1,059,007 Expenses waived by Advisor (Note 2)............................ (378,626) ---------- NET EXPENSES................................................... 680,381 ---------- NET INVESTMENT INCOME ......................................... 462,604 ---------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments...................................................... 5,977,773 Futures contracts................................................ (481,131) Foreign currency transactions.................................... 2,763,124 ---------- Net realized gain.............................................. 8,259,766 ---------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency................................. 1,152,333 Futures contracts................................................ 53,797 Forward contracts................................................ 52,974 Translation of other assets and liabilities denominated in for- eign currency................................................... (397) ---------- Change in net unrealized appreciation or depreciation.......... 1,258,707 ---------- Net realized and unrealized gain................................... 9,518,473 ---------- Net increase in net assets resulting from operations............... $9,981,077 ==========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 32 GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
YEAR YEAR ENDED ENDED JUNE 30, JUNE 30, 1996 1995 ------------- ----------- OPERATIONS: Net investment income.............................. $ 462,604 $ 361,529 Net realized gain (loss)........................... 8,259,766 (947,502) Change in net unrealized appreciation or depreciation...................................... 1,258,707 1,778,802 ----------- ----------- Net increase in net assets resulting from opera- tions............................................. 9,981,077 1,192,829 ----------- ----------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income........... (337,038) (72,633) Distributions from net realized gain............... (3,021,585) -- Distributions in excess of net realized gain....... -- (198,395) ----------- ----------- Total distributions to shareholders*............... (3,358,623) (271,028) ----------- ----------- CAPITAL SHARE TRANSACTIONS: Shares sold........................................ 11,563,213 133,064 Shares issued in acquisition of SBC World Growth Fund (Note 1)..................................... 25,670,575 -- Shares issued on reinvestment of distributions..... 3,336,320 271,028 Shares redeemed.................................... (7,760,045) (1,262,526) ----------- ----------- Net increase (decrease) in net assets resulting from capital share transactions (Note 7)............................. 32,810,063 (858,434) ----------- ----------- TOTAL INCREASE IN NET ASSETS.................... 39,432,517 63,367 ----------- ----------- NET ASSETS: Beginning of year.................................. 20,705,565 20,642,198 ----------- ----------- End of year (including accumulated undistributed net investment income of $90,547 and $59,734, re- spectively)....................................... $60,138,082 $20,705,565 =========== =========== *DISTRIBUTIONS BY CLASS: Distributions from net investment income: Brinson Class...................................... $ (295,340) $ (72,633) SwissKey Class..................................... (41,698) -- Distributions from and in excess of net realized gain: Brinson Class...................................... (1,399,995) (198,395) SwissKey Class..................................... (1,621,590) -- ----------- ----------- $(3,358,623) $ (271,028) =========== ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 33 GLOBAL EQUITY FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
YEAR YEAR JANUARY 28, 1994* ENDED ENDED THROUGH BRINSON CLASS JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994 - -------------------------------------------------------------------------------- Net asset value, beginning of pe- riod............................ $ 9.93 $ 9.49 $ 10.00 ------- ------- ------- Income from investment opera- tions: Net investment income (loss)... 0.18 0.18 0.07 Net realized and unrealized gain (loss)................... 2.29 0.39 (0.54) ------- ------- ------- Total income (loss) from in- vestment operations......... 2.47 0.57 (0.47) ------- ------- ------- Less distributions: Distributions from net invest- ment income................... (0.14) (0.04) (0.04) Distributions from and in ex- cess of net realized gain..... (0.69) (0.09) -- ------- ------- ------- Total distributions.......... (0.83) (0.13) (0.04) ------- ------- ------- Net asset value, end of period... $ 11.57 $ 9.93 $ 9.49 ======= ======= ======= Total return (non-annualized).... 25.66% 6.06% (4.70%) Ratios/Supplemental data Net assets, end of period (in 000s).......................... $27,126 $20,706 $20,642 Ratio of expenses to average net assets: Before expense reimbursement... 1.77% 2.06% 2.65%** After expense reimbursement.... 1.00% 1.00% 1.00%** Ratio of net investment income to average net assets: Before expense reimbursement... 0.57% 0.71% 0.24%** After expense reimbursement.... 1.34% 1.77% 1.89%** Portfolio turnover rate......... 74% 36% 21% Average commission rate paid per share.......................... $0.0288 N/A N/A
* Commencement of investment operations ** Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 34 GLOBAL EQUITY FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout the period presented.
JULY 31, 1995* THROUGH SWISSKEY CLASS JUNE 30, 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period............................ $ 10.35 ------- Income from investment operations: Net investment loss........................................... (0.01) Net realized and unrealized gain.............................. 1.93 ------- Total income from investment operations..................... 1.92 ------- Less distributions: Distributions from net investment income...................... (0.01) Distributions from net realized gain.......................... (0.69) ------- Total distributions......................................... (0.70) ------- Net asset value, end of period.................................. $ 11.57 ======= Total return (non-annualized)................................... 19.25% Ratios/Supplemental data Net assets, end of period (in 000s)............................ $33,012 Ratio of expenses to average net assets: Before expense reimbursement.................................. 2.53%** After expense reimbursement................................... 1.76%** Ratio of net investment income (loss) to average net assets: Before expense reimbursement.................................. (0.19%)** After expense reimbursement................................... 0.58%** Portfolio turnover rate........................................ 74% Average commission rate paid per share......................... $0.0288
* Commencement of SwissKey Class distribution ** Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 35 GLOBAL BOND FUND - -------------------------------------------------------------------------------- LOGO The Global Bond Fund is an actively managed portfolio that provides integrated asset management across and within world fixed income markets. The investment process is strategic in nature and is driven by deviations of market price from fundamental value. We believe this philosophy offers the greatest potential for achieving enhanced long-term returns, while controlling risk. The Brinson Global Bond Fund has provided an annualized return of 7.40% since July 31, 1993 (performance inception date). Its benchmark, the Salomon World Government Bond Index, returned 7.97%. For the year ended June 30, 1996, the Fund returned 11.50%, while the benchmark returned 0.37%. In the first half of 1996, the Fund produced a return of 2.12% compared to the -1.47% return of the benchmark. In the first half of 1996, the Global Bond Fund benefited from a continued environment of low inflation. The U.S. bond market, which is an underweight in the Fund, was a notable exception to the positive U.S. dollar-hedged returns provided by other bond markets. The U.S. bond market was detrimentally affected by stronger than expected growth in economic activity in general and strong employment gains in particular. U.S. market participants' fears included higher inflation and the potential for a tighter monetary policy as reflected in higher short-term interest rates. Otherwise, global bond markets provided positive year-to-date hedged returns. The Japan bond market underweight detracted from performance as continued Bank of Japan accommodation sustained interest rates at below equilibrium levels. Low Japanese interest rates do not appear to be fundamentally sustainable and we do not expect the relatively favorable performance of the bond market to continue. The Fund's underweight of the Japanese yen and core-European currencies contributed strongly to Fund performance. The yen suffered not only from a nearly 6.00% depreciation, but also from extremely low short-term interest rates. Core European currencies also depreciated by about 6.00%, but short-term rates were similar to those in the U.S. ------------------------------------------------------------ 36 GLOBAL BOND FUND - -------------------------------------------------------------------------------- LOGO TOTAL RETURN
6 months 1 year Annualized ended ended 7/31/93* 6/30/96 6/30/96 to 6/30/96 - -------------------------------------------------------------------------- BRINSON GLOBAL BOND FUND 2.12% 11.50% 7.40% Salomon World Government Bond Index (currency unhedged) -1.47 0.37 7.97 Salomon World Government Bond Index (currency hedged) 1.69 8.94 6.77 - --------------------------------------------------------------------------
*Performance inception date of the Brinson Global Bond Fund. Total return includes reinvestment of all capital gain and income distributions. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $100,000 This chart shows the growth in the value of an investment in the Brinson Global Bond Fund and the Salomon World Government Bond Index (currency unhedged and hedged) if you had invested $100,000 on July 31, 1993, and had reinvested all your income dividends and capital gain distributions through June 30, 1996. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. BRINSON GLOBAL BOND FUND VS. SALOMON WORLD GOVERNMENT BOND INDEX (CURRENCY UNHEDGED AND HEDGED) Wealth Value with Dividends Reinvested [CHART APPEARS HERE] 7/31/93 6/30/96 -------- -------- Brinson Global Bond Fund $100,000 $123,165 Salomon World Government Bond Index (currency unhedged) $100,000 $125,050 Salomon World Government Bond Index (currency hedged) $100,000 $121,059 Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. ------------------------------------------------------------ 37 GLOBAL BOND FUND - -------------------------------------------------------------------------------- LOGO ASSET ALLOCATION As of June 30, 1996
Current Benchmark Strategy - ------------------------------- U.S. 33.3% 27.3% Japan 19.5 5.0 Australia 1.0 3.5 Austria 0.9 0.0 Belgium 2.6 2.9 Canada 3.0 7.0 Denmark 1.7 6.8 Finland 0.4 0.0 France 7.5 8.5 Germany 10.3 15.3 Italy 6.4 7.3 Netherlands 3.4 8.8 Spain 2.4 2.8 Sweden 1.7 0.0 Switzerland 0.4 0.0 U.K. 5.5 4.8 - ------------------------------- 100.0% 100.0%
INDUSTRY DIVERSIFICATION As a Percent of Net Assets As of June 30, 1996 - -------------------------------------------------------------------------------- U.S. BONDS Corporate Bonds Asset-Backed........................................................... 0.79% CMO.................................................................... 0.45 Consumer............................................................... 0.21 Financial.............................................................. 1.34 Telecommunications..................................................... 0.57 Transportation......................................................... 0.26 ------ 3.62 International Dollar Bonds............................................. 1.16 U.S. Government Agencies............................................... 7.04 U.S. Government Obligations............................................ 10.51 ------ Total U.S. Bonds..................................................... 22.33* ------ NON-U.S. BONDS Foreign Financial Bonds................................................. 22.97 Foreign Government Bonds................................................ 45.36 ------ Total Non-U.S. Bonds................................................. 68.33 ------ SHORT-TERM INVESTMENTS.................................................. 7.92* ------ TOTAL INVESTMENTS.................................................... 98.58 CASH AND OTHER ASSETS, LESS LIABILITIES................................. 1.42 ------ NET ASSETS........................................................... 100.00% ====== - --------------------------------------------------------------------------------
*The Fund held a long position in U.S. Treasury futures on June 30, 1996 which increased U.S. bond exposure from 22.33% to 26.64% and decreased the Fund's exposure to Short-Term Investments from 7.92% to 3.61%. CURRENCY ALLOCATION As of June 30, 1996
Current Benchmark Strategy - ------------------------------- U.S. 33.3% 76.6% Japan 19.5 1.5 Australia 1.0 1.0 Austria 0.9 0.0 Belgium 2.6 0.0 Canada 3.0 3.1 Denmark 1.7 0.0 Finland 0.4 0.0 France 7.5 0.0 Germany 10.3 0.0 Italy 6.4 9.5 Netherlands 3.4 0.0 Spain 2.4 2.8 Sweden 1.7 0.0 Switzerland 0.4 0.0 U.K. 5.5 5.5 - ------------------------------- 100.0% 100.0%
------------------------------------------------------------ 38 GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ------ ----- Bonds -- 90.66% U.S. BONDS -- 22.33% U.S. CORPORATE BONDS -- 3.62% Chrysler Financial Corp. MTN 6.500%, due 08/21/97................................... $ 165,000 $ 165,493 Delta Air Lines 10.060%, due 01/02/16.................................. 100,000 115,562 Farmers Insurance Exchange 144-A 8.625%, due 05/01/24................................... 250,000 236,313 Ford Credit Auto Lease Trust 6.350%, due 10/15/98................................... 175,580 176,145 Ford Credit Grantor Trust 95-B 5.900%, due 10/15/00................................... 83,549 83,223 GMAC MTN 6.750%, due 06/10/02................................... 200,000 196,734 Green Tree Acceptance Corp. 94-A 6.900%, due 02/15/04................................... 35,689 35,347 Green Tree Financial 94-2 8.300%, due 05/15/19................................... 25,000 25,657 News America Corp. 7.750%, due 01/20/24................................... 275,000 255,272 Structured Asset Securities Corp. 8.111%, due 04/25/27................................... 139,060 141,076 The Money Store 94-A3 5.525%, due 09/15/18................................... 96,545 93,723 Time Warner Entertainment, Inc. 9.150%, due 02/01/23................................... 45,000 46,561 8.375%, due 03/15/23................................... 50,000 48,555 ---------- 1,619,661 ---------- INTERNATIONAL DOLLAR BONDS -- 1.16% Korea Development Bank 6.500%, due 11/15/02............. 100,000 95,923 Republic of South Africa 9.625%, due 12/15/99........... 125,000 130,469 Royal Bank of Scotland 7.375%, due 04/01/06................................... 300,000 292,949 ---------- 519,341 ---------- U.S. GOVERNMENT AGENCIES -- 7.04% Federal Home Loan Mortgage Corp. 7.000%, due 04/15/07................................... 187,253 179,510 5.800%, due 08/15/19................................... 90,000 81,052 Federal Home Loan Mortgage Corp. Gold 8.000%, due 05/01/23................................... 120,698 121,791 9.000%, due 05/01/24................................... 357,779 375,532 9.500%, due 04/01/25................................... 34,781 36,944 Federal National Mortgage Association 7.000%, due 03/01/03................................... 35,000 34,869 6.240%, due 01/28/04................................... 75,000 70,551 6.220%, due 03/13/06................................... 150,000 141,635 6.700%, due 08/25/20................................... 150,000 140,658 9.000%, due 08/01/21................................... 34,254 35,958 8.500%, due 07/01/22................................... 24,800 25,661 7.500%, due 05/01/25................................... 407,838 402,609 6.500%, due 02/01/26................................... 79,685 74,530 6.500%, due 03/01/26................................... 500,000 467,653 7.000%, due 03/01/26................................... 530,000 509,956 Government National Mortgage Association 7.500%, due 03/15/26................................... 330,000 325,150 6.500%, due 03/20/26................................... 69,697 64,491 Tennessee Valley Authority 6.875%, due 12/15/43................................... 65,000 57,471 ---------- 3,146,021 ---------- U.S. GOVERNMENT OBLIGATIONS-- 10.51% U.S. Treasury Coupon Strips 0.000%, due 05/15/03................................... 385,000 245,430 U.S. Treasury Notes and Bonds 5.500%, due 11/15/98................................... 510,000 502,031 6.375%, due 03/31/01................................... 1,535,000 1,527,804 5.750%, due 08/15/03................................... 680,000 647,062 7.875%, due 11/15/04................................... 155,000 166,625 6.500%, due 05/15/05................................... 400,000 394,375 8.125%, due 05/15/21................................... 610,000 687,203 U.S. Treasury Principal Strips 0.000%, due 05/15/05................................... 505,000 278,063 0.000%, due 02/15/15................................... 510,000 137,838 0.000%, due 11/15/15................................... 445,000 113,680 ---------- 4,700,111 ---------- Total U.S. Bonds........................................ 9,985,134 ---------- NON-U.S. BONDS -- 68.33% AUSTRALIA -- 3.11% Government of Australia 8.550%, due 08/15/03............................... AUD 1,700,000 1,389,143 ---------- BELGIUM -- 3.16% Kingdom of Belgium 8.750%, due 06/25/02............................... BEF 14,000,000 507,959 9.000%, due 03/28/03................................... 13,000,000 477,485 7.500%, due 07/29/08................................... 13,000,000 429,476 ---------- 1,414,920 ---------- CANADA -- 5.58% British Columbia 7.250%, due 09/21/05............................... CAD 1,950,000 1,360,281 Government of Canada 4.250%, due 12/01/21................................... 1,570,000 1,134,286 ---------- 2,494,567 ---------- DENMARK -- 6.15% City of Copenhagen 6.250%, due 03/15/01............................... DKK 2,400,000 413,797 Great Belt 7.000%, due 09/02/03................................... 12,350,000 2,116,168 Kingdom of Denmark 7.000%, due 11/10/24................................... 1,500,000 220,453 ---------- 2,750,418 ----------
- -------------------------------------------------------------------------------- 39 GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ------ ----- FRANCE -- 8.20% Eurofima 8.625%, due 09/01/99............................. FRF 5,100,000 $1,084,171 Government of France (OAT) 8.500%, due 12/26/12................................. 5,600,000 1,255,214 8.500%, due 04/25/23................................. 2,400,000 531,095 KFW International Finance 7.750%, due 02/17/98................................. 2,600,000 529,040 Kingdom of Finland 9.000%, due 08/13/03................................. 1,200,000 266,463 ---------- 3,665,983 ---------- GERMANY -- 14.30% Bundesrepublik Deutscheland 6.250%, due 01/04/24............................. DEM 950,000 548,929 Deutsche Bundesbahn 9.000%, due 12/01/00................................. 540,000 400,751 European Economic Community 6.500%, due 03/10/00................................. 2,650,000 1,808,915 Kingdom of Norway 6.125%, due 05/05/98................................. 1,040,000 705,473 LKB Baden-Wurt Finance 6.500%, due 09/15/08................................. 850,000 537,777 Republic of Finland 5.500%, due 02/05/03................................. 850,000 536,939 Republic of Ireland 7.250%, due 03/18/03................................. 2,700,000 1,858,124 ---------- 6,396,908 ---------- ITALY -- 7.26% Bayerische Landesbank 10.750%, due 03/01/03............................ ITL 1,000,000,000 706,970 Deutschebank 11.750%, due 02/23/98................................ 900,000,000 617,192 European Investment Bank 12.750%, due 02/15/00................................ 280,000,000 205,714 Landesbank Rheinland 8.250%, due 06/02/98................................. 750,000,000 486,513 LKB Baden-Wurt Finance 10.750%, due 04/14/03................................ 950,000,000 672,396 Nordic Investment Bank 10.800%, due 05/24/03................................ 600,000,000 425,160 Republic of Italy (BTP) 8.312%, due 02/01/01................................. 200,000,000 134,551 ---------- 3,248,496 ---------- JAPAN -- 5.70% Asian Development Bank 5.000%, 02/05/03................................. JPY 40,000,000 409,367 Government of Japan No.130 6.700%, due 06/20/00................................. 80,000,000 858,049 Government of Japan No.144 6.000%, due 12/20/01................................. 70,000,000 749,453 Republic of Italy 3.500%, due 06/20/01................................. 56,000,000 530,035 ---------- 2,546,904 ---------- NETHERLANDS -- 8.21% Government of Nederlands 7.500%, due 11/15/99...............................NLG 1,290,000 816,217 8.250%, due 09/15/07.................................. 520,000 343,945 International Nederland Verzekeringen 6.250%, due 12/28/05.............................................. 1,800,000 1,020,271 Rabobank 6.750%, due 06/25/03.................................. 1,750,000 1,063,185 Republic of Austria 6.250%, due 02/28/24.................................. 825,000 427,942 ----------- 3,671,560 ----------- SPAIN -- 2.62% Government of Spain 10.100%, due 02/28/01..............................ESP 140,000,000 1,171,554 ----------- UNITED KINGDOM -- 4.04% Abbey National 8.750%, due 05/24/04...............................GBP 350,000 552,059 British Gas PLC 8.125%, due 03/31/03.................................. 545,000 837,403 UK Treasury 8.000%, due 06/10/03.................................. 80,000 126,651 8.000%, due 09/27/13.................................. 190,000 289,540 ----------- 1,805,653 ----------- Total Non-U.S. Bonds................................... 30,556,106 ----------- Total Bonds (Cost $40,050,938)......................... 40,541,240 ----------- Short-Term Investments-- 7.92% GOVERNMENT OBLIGATION -- 0.07% U.S. Treasury Bill 5.030%, due 11/14/96 $ 30,000 29,430 ----------- 29,430 ----------- COMMERCIAL PAPER -- 7.85% Baxter International, Inc. 5.550%, due 07/10/96.................................. 700,000 699,029 The Limited, Inc. 5.650%, due 07/01/96.................................. 1,051,000 1,051,000 Melville Corp. 5.663%, due 07/01/96.................................. 1,763,000 1,763,000 ----------- 3,513,029 ----------- Total Short-Term Investments (Cost $3,542,459)..................................... 3,542,459 ----------- Total Investments (Cost $43,593,397) -- 98.58% (a)...................... 44,083,699 ----------- Cash and other assets, less liabilities -- 1.42%............................. 635,306 ----------- Net Assets -- 100%..................................... $44,719,005 ===========
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 40 GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a)Aggregate cost for federal income tax purposes was $43,593,397; and net unrealized appreciation consisted of: Gross unrealized appreciation.................................. $ 651,225 Gross unrealized depreciation.................................. (160,923) --------- Net unrealized appreciation................................. $ 490,302 =========
FRN: Floating rate note--The rate disclosed is that in effect at June 30, 1996. MTN: Medium term note FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4) The Global Bond Fund had the following open forward foreign currency contracts as of June 30, 1996:
SETTLEMENT LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) ---------- ------------- ---------- ---------- FORWARD FOREIGN CURRENCY BUY CONTRACTS British Pound........... 12/04/96 230,000 $ 357,095 $ 10,255 Italian Lira............ 12/04/96 1,560,000,000 999,373 13,715 FORWARD FOREIGN CURRENCY SALE CONTRACTS Australian Dollar....... 12/04/96 1,300,000 1,018,062 618 Belgian Franc........... 12/04/96 46,500,000 1,498,831 (15,577) Canadian Dollar......... 12/04/96 2,100,000 1,542,687 (8,608) Danish Kroner........... 12/04/96 16,600,000 2,850,791 (39,947) Dutch Guilder........... 12/04/96 6,400,000 3,792,178 (27,472) French Franc............ 12/04/96 19,400,000 3,795,695 (47,265) German Mark............. 12/04/96 10,200,000 6,766,006 (74,849) Japanese Yen............ 12/04/96 160,000,000 1,491,565 46,157 --------- $(142,973) =========
FUTURES CONTRACTS (NOTE 5) The Global Bond Fund had the following open futures contracts as of June 30, 1996:
SETTLEMENT CURRENT UNREALIZED DATE COST VALUE LOSS ---------- ---------- ---------- ---------- INTEREST RATE FUTURES BUY CONTRACTS 5 Year U.S. Treasury Note, 10 con- tracts............................ Sept 1996 $1,058,703 $1,057,500 $(1,203) 10 Year U.S. Treasury Note, 3 con- tracts............................ Sept 1996 322,687 322,500 (187) 30 Year U.S. Treasury Bond, 5 con- tracts............................ Sept 1996 548,125 547,656 (469) ------- $(1,859) =======
The market value of investments pledged to cover margin requirements for the open futures positions at June 30, 1996 was $29,430. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 41 GLOBAL BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1996 ASSETS: Investments, at value (Cost $43,593,397) (Note 1)................. $44,083,699 Cash.............................................................. 10,136 Foreign currency, at value (Cost $1,132,083)...................... 1,130,424 Receivables: Investment securities sold....................................... 479,285 Interest......................................................... 1,042,174 Variation margin (Note 5)........................................ 12,968 Other assets...................................................... 5,848 ----------- TOTAL ASSETS................................................... 46,764,534 ----------- LIABILITIES: Payables: Investment securities purchased.................................. 1,809,805 Net unrealized depreciation on forward foreign currency con- tracts.......................................................... 142,973 Investment advisory fees (Note 2)................................ 1,360 Accrued expenses................................................. 91,391 ----------- TOTAL LIABILITIES.............................................. 2,045,529 ----------- NET ASSETS......................................................... $44,719,005 =========== NET ASSETS CONSIST OF: Paid in capital (Note 7).......................................... $43,137,444 Accumulated undistributed net investment income................... 1,052,943 Accumulated net realized gain..................................... 198,256 Net unrealized appreciation....................................... 330,362 ----------- NET ASSETS..................................................... $44,719,005 =========== OFFERING PRICE PER SHARE: Brinson Class: Net asset value, offering price and redemption price per share (Based on net assets of $41,065,646 and 4,091,541 shares issued and outstanding) (Note 7)........................................ $ 10.04 =========== SwissKey Class: Net asset value, offering price and redemption price per share (Based on net assets of $3,653,359 and 364,428 shares issued and outstanding) (Note 7)............................................ $ 10.02 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 42 GLOBAL BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1996 INVESTMENT INCOME: Interest.......................................................... $2,733,764 ---------- TOTAL INCOME................................................... 2,733,764 ---------- EXPENSES: Advisory (Note 2)................................................. 310,066 Accounting........................................................ 102,901 Professional...................................................... 62,391 Transfer agent.................................................... 54,917 Registration...................................................... 47,245 Custodian......................................................... 32,416 Distribution (Note 6)............................................. 9,874 Other............................................................. 72,052 ---------- TOTAL EXPENSES................................................. 691,862 Expenses waived by Advisor (Note 2)............................ (309,908) ---------- NET EXPENSES................................................... 381,954 ---------- NET INVESTMENT INCOME.......................................... 2,351,810 ---------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments...................................................... 1,372,839 Futures contracts................................................ (11,267) Foreign currency transactions.................................... 2,661,334 ---------- Net realized gain............................................... 4,022,906 ---------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency................................. (2,549,382) Forward contracts................................................ 596,085 Futures contracts................................................ (1,859) Translation of other assets and liabilities denominated in for- eign currency................................................... (37,388) ---------- Change in net unrealized appreciation or depreciation........... (1,992,544) ---------- Net realized and unrealized gain.................................. 2,030,362 ---------- Net increase in net assets resulting from operations.............. $4,382,172 ==========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 43 GLOBAL BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
YEAR YEAR ENDED ENDED JUNE JUNE 30, 30, 1996 1995 ----------- ----------- OPERATIONS: Net investment income............................... $ 2,351,810 $ 2,663,927 Net realized gain (loss)............................ 4,022,906 (467,411) Change in net unrealized appreciation or deprecia- tion .............................................. (1,992,544) 2,879,443 ----------- ----------- Net increase in net assets resulting from opera- tions.............................................. 4,382,172 5,075,959 ----------- ----------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income............ (3,447,154) (1,146,710) Distributions in excess of net investment income.... (1,534,232) -- Distributions from net realized gain................ (355,057) -- ----------- ----------- Total distributions to shareholders*................ (5,336,443) (1,146,710) ----------- ----------- CAPITAL SHARE TRANSACTIONS: Shares sold......................................... 14,584,928 15,734,111 Shares issued on reinvestment of distributions...... 3,954,345 824,053 Shares redeemed..................................... (24,728,515) (5,474,354) ----------- ----------- Net increase (decrease) in net assets resulting from capital share transactions (Note 7)................ (6,189,242) 11,083,810 ----------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS.......... (7,143,513) 15,013,059 ----------- ----------- NET ASSETS: Beginning of year................................... 51,862,518 36,849,459 ----------- ----------- End of year (including accumulated undistributed net investment income of $1,052,943 and $1,095,344, re- spectively)........................................ $44,719,005 $51,862,518 =========== =========== *DISTRIBUTIONS BY CLASS: Distributions from and in excess of net investment income Brinson Class...................................... (4,734,956) (1,146,710) SwissKey Class..................................... (246,430) -- Distributions from net realized gain Brinson Class...................................... (338,786) -- SwissKey Class..................................... (16,271) -- ----------- ----------- Total distributions to shareholders................. (5,336,443) (1,146,710) ----------- -----------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 44 GLOBAL BOND FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
YEAR YEAR JULY 30, 1993* ENDED ENDED THROUGH BRINSON CLASS JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994 - ------------------------------------------------------------------------------- Net asset value, beginning of peri- od................................. $ 10.39 $ 9.55 $ 10.00 ------- ------- ------- Income (loss) from investment oper- ations: Net investment income ............ 0.84 0.50 0.45 Net realized and unrealized gain (loss)........................... 0.31 0.58 (0.52) ------- ------- ------- Total income (loss) from invest- ment operations................ 1.15 1.08 (0.07) ------- ------- ------- Less distributions: Distributions from and in excess of net investment income......... (1.40) (0.24) (0.28) Distributions from and in excess of net realized gain............. (0.10) -- (0.10) ------- ------- ------- Total distributions............. (1.50) (0.24) (0.38) ------- ------- ------- Net asset value, end of period...... $ 10.04 $ 10.39 $ 9.55 ======= ======= ======= Total return (non-annualized)....... 11.50% 11.34% (0.79%) Ratios/Supplemental data Net assets, end of period (in 000s)............................. $41,066 $51,863 $36,849 Ratio of expenses to average net assets: Before expense reimbursement...... 1.65% 1.43% 1.78%** After expense reimbursement....... 0.90% 0.90% 0.90%** Ratio of net investment income to average net assets: Before expense reimbursement...... 4.98% 5.53% 4.03%** After expense reimbursement....... 5.73% 6.06% 4.91%** Portfolio turnover rate............ 184% 199% 189%
* Commencement of investment operations ** Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 45 GLOBAL BOND FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout the period presented.
JULY 31, 1995* THROUGH SWISSKEY CLASS JUNE 30, 1996 - -------------------------------------------------------------------------------- Net asset value, beginning of period............................. $10.56 ------ Income from investment operations: Net investment income.......................................... 0.78 Net realized and unrealized gain............................... 0.15 ------ Total income from investment operations...................... 0.93 ------ Less distributions: Distributions from and in excess of net investment income...... (1.37) Distributions from net realized gain........................... (0.10) ------ Total distributions.......................................... (1.47) ------ Net asset value, end of period................................... $10.02 ====== Total return (non-annualized).................................... 9.17% Ratios/Supplemental data Net assets, end of period (in 000s)............................. $3,653 Ratio of expenses to average net assets: Before expense reimbursement................................... 2.14%** After expense reimbursement.................................... 1.39%** Ratio of net investment income to average net assets: Before expense reimbursement................................... 4.49%** After expense reimbursement.................................... 5.24%** Portfolio turnover rate......................................... 184%
* Commencement of SwissKey Class distribution ** Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 46 THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1.SIGNIFICANT ACCOUNTING POLICIES The Brinson Funds (the "Trust") is an open-end, management investment company registered under the Investment Company Act of 1940, as amended, as a series company. The Trust currently offers shares of seven series: Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund and Non-U.S. Equity Fund. Each Fund has two classes of shares outstanding, Brinson Class and SwissKey Class. There are an unlimited number of shares of each class with par value of $0.001 authorized. Each share represents an identical interest in the investments of the Funds and has the same rights. The Trust entered into an Agreement and Plan of Reorganization dated June 16, 1995 (the "Plan of Reorganization"), with SwissKey Funds. On July 28, 1995, pursuant to the Plan of Reorganization, the Trust acquired all of the net assets of the SBC World Growth Fund of the SwissKey Funds, which totalled $25,670,575 (including $3,848,285 of net unrealized appreciation) in exchange solely for 2,474,177 SwissKey Fund shares of the Trust's Global Equity Fund. The SwissKey Fund shares were then distributed to shareholders of the SBC World Growth Fund according to their respective interests, and the SBC World Growth Fund was dissolved. The total net assets of the Global Equity Fund were $47,088,147 immediately after the acquisition. The following is a summary of significant accounting policies consistently followed by the Global Fund, Global Equity Fund and Global Bond Fund (each a "Fund," collectively the "Funds") in the preparation of their financial statements. A.INVESTMENT VALUATION: Securities for which quotations are readily available are valued at the last available sales price on the exchange or market on which they are principally traded, or lacking any sales, at the last available bid price on the exchange or market on which such securities are principally traded. Securities for which market quotations are not readily available, including restricted securities which are subject to limitations on their sale, are valued at fair value as determined in good faith by or under the direction of the Trust's Board of Trustees. Investments in affiliated investment companies are valued each day based on the closing net asset value of the fund. Fixed income/debt securities are valued by using market quotations or independent services that use prices provided by market makers or estimates of market values obtained from yield data relating to instruments or securities with similar characteristics. Futures contracts are valued at the settlement price established each day on the exchange on which they are traded. Forward contracts are valued daily using quoted forward exchange rates. Short-term obligations with a maturity of 60 days or less are valued at amortized cost, which approximates market value. B.FOREIGN CURRENCY TRANSLATION: Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the mean between the bid and offered quotations of such currencies against the U.S. dollar as of the date of valuation. Purchases and sales of portfolio securities, commitments under forward foreign currency contracts, income receipts and expense accruals are translated at the prevailing exchange rate on the date of each transaction. Realized and unrealized foreign exchange gains or losses on investments are included as a component of net realized and unrealized gain or loss in the statement of operations. C.INVESTMENT TRANSACTIONS: Investment transactions are accounted for on a trade date basis. Gains and losses on securities sold are determined on an identified cost basis. D.INVESTMENT INCOME: Interest income, which includes the amortization of premiums and discounts, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities are recorded as the information becomes available. E.FEDERAL INCOME TAXES: It is the policy of the Funds to comply with all requirements of the Internal Revenue Code (the "Code") applicable to regulated investment companies and to distribute substantially all of their taxable income to their shareholders. The Funds have met the requirements of the Code applicable to regulated investment companies for the year ended June 30, 1996. Therefore, no federal income tax provision was required. - -------------------------------------------------------------------------------- 47 THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- F.DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of the Funds to distribute their respective net investment income on a semi-annual basis and net capital gains, if any, annually. Distributions to shareholders are recorded on the ex- dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences are primarily due to differing treatments for foreign currency transactions. Differences in dividends per share between the classes are due to distribution expenses. Amounts equal to 7.28% and 14.67% of the amount taxable as ordinary income qualify for the dividends received deduction available to corporate shareholders for the Global Fund and the Global Equity Fund, respectively. G.INCOME AND EXPENSE ALLOCATION: All income earned and expenses incurred by the Fund will be borne on a pro rata basis by each of the classes, except that the Brinson Class shares will not incur any of the distribution expenses. H.USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. 2.INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES Brinson Partners, Inc. (the "Advisor"), a registered investment advisor, provides the Funds with investment management services. As compensation for these services, the Funds pay the Advisor a monthly fee based on each Fund's respective average daily net assets. The Advisor has agreed to waive its fees and reimburse each Fund to the extent total annualized expenses exceed a specified percentage of each Fund's respective average daily net assets. Investment advisory fees and other transactions with affiliates, for the year ended June 30, 1996, were as follows:
FEES ADVISORY BRINSON CLASS SWISSKEY CLASS ADVISORY WAIVED AND/OR FEE EXPENSE CAP EXPENSE CAP FEES REIMBURSED -------- ------------- -------------- ---------- ------------- Global Fund............. 0.80% 1.10% 1.75% $3,415,057 $ -- Global Equity Fund...... 0.80 1.00 1.76 390,824 378,626 Global Bond Fund........ 0.75 0.90 1.39 310,066 309,908
Certain officers of the Funds are also officers and directors of the Advisor. All officers serve without direct compensation from the Funds. Trustees' fees paid to unaffiliated trustees were $11,404, $4,361 and $4,429 for the Global Fund, Global Equity Fund and Global Bond Fund, respectively. At June 30, 1996, the Global Fund was invested in shares of certain affiliated investment companies also sponsored by Brinson Partners, Inc. These investments are listed in the schedule of investments and represent 9.13% of the Fund's total net assets. At June 30, 1996, net unrealized appreciation on these investments was $71,309. 3.INVESTMENT TRANSACTIONS Investment transactions for the year ended June 30, 1996, excluding short-term investments, were as follows:
PROCEEDS PURCHASES FROM SALES ------------ ------------ Global Fund........................................... $713,034,559 $608,243,355 Global Equity Fund.................................... 57,828,955 34,016,248 Global Bond Fund...................................... 71,111,891 74,477,691
- -------------------------------------------------------------------------------- 48 THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 4.FORWARD FOREIGN CURRENCY CONTRACTS The Funds engage in portfolio hedging with respect to changes in currency exchange rates by entering into forward foreign currency contracts to purchase or sell currencies. Forward foreign currency contracts are also used to achieve currency allocation strategies. A forward foreign currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. Risks associated with such contracts include movement in the value of the foreign currency relative to the U.S. dollar and the ability of the counterparty to perform. The unrealized gain, if any, represents the credit risk to the Fund on a forward foreign currency contract. Fluctuations in the value of forward foreign currency contracts are recorded daily as net unrealized gains or losses. The Funds realize a gain or loss upon settlement of the contracts. The statement of operations reflects net realized and net unrealized gains and losses on these contracts. The counterparty to all forward foreign currency contracts, at and for the year ended June 30, 1996, was the Funds' custodian. 5.FUTURES CONTRACTS The Funds may purchase or sell exchange-traded futures contracts, which are contracts that obligate the Funds to make or take delivery of a financial instrument or the cash value of a securities index at a specified future date at a specified price. The Funds enter into such contracts to hedge a portion of their portfolio. Risks of entering into futures contracts include the possibility that there may be an illiquid market or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Funds are required to deposit either cash or securities (initial margin). Subsequent payments (variation margin) are made or received by the Funds, generally on a daily basis. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains or losses. The Funds recognize a realized gain or loss when the contract is closed or expires. The statement of operations reflects net realized and net unrealized gains and losses on these contracts. 6.DISTRIBUTION PLAN The Trust has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940. The Plan governs payments made for the expenses incurred in the promotion and distribution of the SwissKey Class of shares. Annual fees under the Plan, which include a 0.25% service fee, total 0.65%, 0.76% and 0.49% of the average daily net assets of the SwissKey Class of the Global Fund, Global Equity Fund and Global Bond Fund, respectively. 7.CAPITAL TRANSACTIONS Capital stock transactions were as follows:
GLOBAL FUND ---------------------------------------------- YEAR ENDED YEAR ENDED JUNE 30, 1996 JUNE 30, 1995 ---------------------- ----------------------- SHARES VALUE SHARES VALUE --------- ------------ ---------- ------------ Sales: Brinson Class.................. 7,972,013 $ 95,544,500 11,726,672 $124,484,442 SwissKey Class................. 1,155,619 13,939,062 -- -- --------- ------------ ---------- ------------ Total Sales................. 9,127,632 $109,483,562 11,726,672 $124,484,442 ========= ============ ========== ============ Dividend Reinvestment: Brinson Class.................. 2,632,284 $ 30,918,724 960,415 $ 10,276,565 SwissKey Class................. 20,488 243,591 -- -- --------- ------------ ---------- ------------ Total Dividend Reinvestment. 2,652,772 $ 31,162,315 960,415 $ 10,276,565 ========= ============ ========== ============ Redemptions: Brinson Class.................. 5,330,521 $ 63,966,318 7,205,445 $ 77,406,972 SwissKey Class................. 24,583 296,145 -- -- --------- ------------ ---------- ------------ Total Redemptions........... 5,355,104 $ 64,262,463 7,205,445 $ 77,406,972 ========= ============ ========== ============
- -------------------------------------------------------------------------------- 49 THE BRINSON FUNDS -- NOTES TO FINANCIAL STATEMENTS - --------------------------------------------------------------------------------
GLOBAL EQUITY FUND ------------------------------------------- YEAR ENDED YEAR ENDED JUNE 30, 1996 JUNE 30, 1995 --------------------- --------------------- SHARES VALUE SHARES VALUE --------- ----------- --------- ----------- Sales: Brinson Class.................... 285,419 $ 3,205,567 13,700 $ 133,064 SwissKey Class................... 746,285 8,357,646 -- -- --------- ----------- --------- ----------- Total Sales................... 1,031,704 $11,563,213 13,700 $ 133,064 ========= =========== ========= =========== Shares issued in acquisition of SBC World Growth Fund: Brinson Class.................... -- -- -- -- SwissKey Class................... 2,474,177 $25,670,575 -- -- --------- ----------- --------- ----------- Total......................... 2,474,177 $25,670,575 -- -- ========= =========== ========= =========== Dividend Reinvestment: Brinson Class.................... 160,063 $ 1,694,631 28,495 $ 271,028 SwissKey Class................... 155,720 1,641,689 -- -- --------- ----------- --------- ----------- Total Dividend Reinvestment... 315,783 $ 3,336,320 28,495 $ 271,028 ========= =========== ========= =========== Redemptions: Brinson Class.................... 186,600 $ 2,055,092 131,587 $ 1,262,526 SwissKey Class................... 523,404 5,704,953 -- -- --------- ----------- --------- ----------- Total Redemptions............. 710,004 $ 7,760,045 131,587 $ 1,262,526 ========= =========== ========= =========== GLOBAL BOND FUND ------------------------------------------- YEAR ENDED YEAR ENDED JUNE 30, 1996 JUNE 30, 1995 --------------------- --------------------- SHARES VALUE SHARES VALUE --------- ----------- --------- ----------- Sales: Brinson Class.................... 1,094,889 $10,985,420 1,615,817 $15,734,111 SwissKey Class................... 345,211 3,599,508 -- -- --------- ----------- --------- ----------- Total Sales................... 1,440,100 $14,584,928 1,615,817 $15,734,111 ========= =========== ========= =========== Dividend Reinvestment: Brinson Class.................... 374,786 $ 3,722,031 80,422 $ 824,053 SwissKey Class................... 23,414 232,314 -- -- --------- ----------- --------- ----------- Total Dividend Reinvestment... 398,200 $ 3,954,345 80,422 $ 824,053 ========= =========== ========= =========== Redemptions: Brinson Class.................... 2,369,683 $24,686,522 564,413 $ 5,474,354 SwissKey Class................... 4,197 41,993 -- -- --------- ----------- --------- ----------- Total Redemptions............. 2,373,880 $24,728,515 564,413 $ 5,474,354 ========= =========== ========= ===========
- -------------------------------------------------------------------------------- 50 REPORT OF INDEPENDENT AUDITORS - -------------------------------------------------------------------------------- The Board of Trustees and Shareholders The Brinson Funds -- Global Fund Global Equity Fund Global Bond Fund We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of the Brinson Funds -- Global Fund, Global Equity Fund, and Global Bond Fund as of June 30, 1996, the related statements of operations for the year then ended and changes in net assets and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmations of securities owned as of June 30, 1996, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Brinson Funds -- Global Fund, Global Equity Fund and Global Bond Fund at June 30, 1996, the results of their operations for the year then ended and the changes in their net assets and the financial highlights for the periods indicated therein, in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP Ernst & Young LLP Chicago, Illinois August 9, 1996 - -------------------------------------------------------------------------------- 51 SPECIAL MEETING OF SHAREHOLDERS - -------------------------------------------------------------------------------- A Special Meeting of Shareholders was held on February 16, 1996. At the meeting, shareholders of the Funds were asked to consider and act upon amendments to the Trust's fundamental investment policies to (1) permit each Fund to invest in affiliated investment companies; and (2) permit each Fund to enter into forward foreign currency transactions for non-hedging purposes. In addition, shareholders of the Global Fund and Global Bond Fund were asked to consider and act upon an amendment to the Trust's fundamental investment policies to increase the limitation on permissible loans of portfolio securities from 25% to 33 1/3% of its assets. The results of all matters voted on by shareholders of the Funds at the Special Meeting held on February 16, 1996 were as follows: A.AMENDMENT TO THE TRUST'S FUNDAMENTAL INVESTMENT POLICIES TO PERMIT EACH FUND TO INVEST IN AFFILIATED INVESTMENT COMPANIES:
For Against Abstain ---------- --------- ------- Global Fund........................................ 20,933,211 3,029,356 496,583 Global Equity Fund................................. 2,476,475 17,186 30,717 Global Bond Fund................................... 2,114,717 -0- -0-
B.AMENDMENT TO THE TRUST'S FUNDAMENTAL INVESTMENT POLICIES TO PERMIT EACH FUND TO ENTER INTO FORWARD FOREIGN CURRENCY TRANSACTIONS FOR NON-HEDGING PURPOSES:
For Against Abstain ---------- --------- ------- Global Fund........................................ 18,496,343 5,463,419 499,388 Global Equity Fund................................. 2,451,785 32,234 40,359 Global Bond Fund................................... 1,645,298 2,405 467,014
C.THE RESULTS OF THE ADDITIONAL MATTER VOTED ON BY SHAREHOLDERS OF THE GLOBAL FUND AND GLOBAL BOND FUND AT THE SPECIAL MEETING HELD ON FEBRUARY 16, 1996 WERE AS FOLLOWS:
For Against Abstain ---------- --------- --------- Global Fund...................................... 16,589,743 5,914,892 1,954,515 Global Bond Fund................................. 1,647,702 -0- 467,015
- -------------------------------------------------------------------------------- 52 - -------------------------------------------------------------------------------- DISTRIBUTED BY: FUND/PLAN BROKER SERVICES, INC. 2 W. ELM STREET CONSHOHOCKEN, PA 19428 This report is submitted for the general information of the shareholders of the Funds. It is not authorized for distribution to prospective investors in the Funds unless preceded or accompanied by an effective Prospectus which includes details regarding the Funds' objectives, policies, expenses and other information. - -------------------------------------------------------------------------------- THE BRINSON FUNDS - -------------------------------------------------------------------------------- 209 South LaSalle Street . Chicago, Illinois 60604-1295 . Tel: (800) 448-2430 ----------------------------- THE BRINSON FUNDS BRINSON NON-U.S. EQUITY FUND ANNUAL REPORT JUNE 30, 1996 GLOBAL INSTITUTIONAL ASSET MANAGEMENT ----------------------------- CHICAGO.BASEL.LONDON.MELBOURNE.NEW YORK.PARIS.SINGAPORE.SYDNEY.TOKYO TRUSTEES AND OFFICERS - -------------------------------------------------------------------------------- LOGO TRUSTEES Walter E. Auch Frank K. Reilly, CFA Edward M. Roob OFFICERS Frank K. Reilly, CFA Carolyn M. Burke, CPA Chairman of the Board Assistant Secretary Catherine E. Macrae E. Thomas McFarlan Assistant Secretary President and Treasurer Debra L. Nichols Thomas J. Digenan, CPA Assistant Secretary Assistant Treasurer Bruce G. Leto Secretary ------------------------------------------------------------ 1 THE FUND'S ADVISOR -- BRINSON PARTNERS, INC. - -------------------------------------------------------------------------------- LOGO Brinson Partners, Inc. is an institutional investment management firm structured around teams of investment specialists covering major world asset classes. We specialize in managing multiple asset portfolios that provide clients with the opportunity to participate in all major world asset classes. It is important that investment decisions, whether they pertain to a global portfolio or a single asset class portfolio, be made within the context of a global capital market perspective. Our coordinated application of investment strategies distinguishes Brinson Partners, Inc. as a leader in global investment management of institutional assets. We firmly believe that asset allocation is portfolio management at its highest and most important level. Performance is maximized through a comprehensive understanding of global investment markets and their interrelationships. Portfolio structure is tailored to specific client objectives and focused upon both risk and return considerations in the context of full long-term investment cycles. At Brinson Partners, Inc. our investment decisions are based on fundamental research, internally developed valuation systems and seasoned judgment. Our independent team approach allows for rapid responses to market changes, while providing each client with the benefit of our best talent and the flexibility to customize portfolios to meet unique requirements. ------------------------------------------------------------ 2 TABLE OF CONTENTS - -------------------------------------------------------------------------------- LOGO Shareholder Letter............................................................ 4 Global Economic and Market Highlights......................................... 5 Non-U.S. Equity Fund.......................................................... 6 Schedule of Investments....................................................... 9 Financial Statements..........................................................13 Financial Highlights..........................................................16 Notes to Financial Statements.................................................18 Report of Independent Auditors................................................21 Special Meeting of Shareholders...............................................22 ------------------------------------------------------------ 3 SHAREHOLDER LETTER - -------------------------------------------------------------------------------- LOGO August 19, 1996 Dear Shareholder: We appreciate the confidence you have placed in us and are pleased to present you with the June 30, 1996 Annual Report for the Non-U.S. Equity Fund. This Report presents our current global economic and market outlook, as well as the Fund's recent investment strategies and performance. To summarize this information: For the period from August 31, 1993 (inception date of the Fund) to June 30, 1996, the Fund provided an annualized total return of 6.80%. In the first half of 1996, the Fund returned 7.00%. Market Strategy The Fund holds a 5% strategic cash position reflecting our view that, with very few exceptions, non-U.S. equity markets are modestly attractive. The Japanese equity market, which is the largest component of the index, is somewhat more overpriced than most of the other non-U.S. markets. Given our valuation analyses and fundamental considerations, we are underweight Japan by 6.5%. The other markets in the index are accordingly overweight by 1.5%. Currency Strategy Currency strategy continues to emphasize those currencies that offer the highest expected cash returns in U.S. dollar terms. We continue to have limited exposure to the overvalued DM-bloc currencies and maintain an underweight in the yen. Offsetting these underweights is a large overweight in the U.S. dollar (39.0%). Our position is near neutral in the British pound, and in the Australian and Canadian dollar. We look forward to the challenges ahead and, as always, welcome your thoughts and comments. Sincerely, /s/ Gary P. Brinson Gary P. Brinson, CFA President and Chief Investment Officer Brinson Partners, Inc. ------------------------------------------------------------ 4 GLOBAL ECONOMIC AND MARKET HIGHLIGHTS - ------------------------------------------------------------------------------- LOGO Since the yen's peak in 1995, the Japanese economy has begun showing signs of recovery. Real GDP growth has recently turned up and output prices appear to have stopped falling. However, structural problems persist, as unemployment hit an all-time high in May. With continued slow economic growth through much of continental Europe, unem- ployment remains high. While the overpriced currencies of the deutschemark bloc are a contributing factor, structural rigidity and accompanying high la- bor costs exacerbate the problems. The U.S. continues to be a leader among de- veloped countries in productivity improvements and the restraint of labor costs. Price pressures in most countries remain subdued, due to continuing central bank responsibility. The last 15 years have seen a powerful trend toward a re- duction and convergence in inflation rates across countries. Nevertheless, bond markets have yet to fully accept a lower-inflation world. Any indication of potential price pressures, such as the recent strong employment reports in the U.S., adversely affects bond prices. NON-U.S. EQUITY ENVIRONMENT MAJOR MARKETS
Total Return in 6 months 1 year Annualized U.S. Dollar ended ended 8/31/93* Hedged Terms 6/30/96 6/30/96 to 6/30/96 - --------------------------------------------- Japan 10.23% 51.04% 5.39% U.K. 2.20 14.41 8.83 Germany 12.38 21.40 9.33 France 17.54 19.52 2.67 Canada 9.60 14.15 11.31 Netherlands 20.20 38.76 17.59 Australia 0.01 6.53 5.75 - ---------------------------------------------
MAJOR CURRENCIES
Percent Change 6 months 1 year Annualized Relative to ended ended 8/31/93* U.S. Dollars 6/30/96 6/30/96 to 6/30/96 - --------------------------------------------- Yen -5.95% -22.60% -1.63% Pound 0.08 -2.33 1.55 Deutschemark -5.97 -9.07 3.50 Canadian Dollar -0.13 0.60 -1.17 - ---------------------------------------------
*Inception date of the Non-U.S. Equity Fund ------------------------------------------------------------ 5 NON-U.S. EQUITY FUND - -------------------------------------------------------------------------------- LOGO The Non-U.S. Equity Fund invests in the common stocks of companies headquartered outside the U.S. We believe that in a non-U.S. investment program the country allocation is the most important. Currency strategies are separately developed and coordinated with market allocations. Our industry strategies and individual security selections are determined by fundamental research. Since its inception on August 31, 1993, the Non-U.S. Equity Fund has earned an annualized return of 6.80% versus 8.03% for the benchmark, the Morgan Stanley Capital International Non-U.S. Equity (Free) Index. For the year ended June 30, 1996, the Fund returned 23.64% while the benchmark returned 13.61%. For the first half of 1996, the Non-U.S. Equity Fund returned 7.00% compared to the 4.82% return of the benchmark. In the first half of 1996, the best performing markets in dollar-hedged terms, with returns in the 17-20% region, were the Netherlands, Spain, France and Ireland. In general, non-U.S. markets were strong, in aggregate growing 9.96% in dollar-hedged terms. In sharp contrast, New Zealand declined 3.97%, while Australia was flat. Japan's 10.23% rise was about average, relative to the other non-U.S. markets and similar to the 10.92% increase in the U.S. market. Market allocation had a negative impact on returns. Cash detracted in an environment of strong market performance. Overweighting the weakly performing Anglo-Saxon markets and underweighting Hong Kong and Switzerland dampened returns. Currency management had a very significant positive impact on performance, accounting for most of the value added by the Fund. Our defensive strategies included a large underweight of the Japanese yen and minimal exposure to the DM-related currencies. These strategies proved highly successful in a period where the yen declined 8.24% and the DM-related currencies fell considerably; varying from 9.77% for the Swiss franc, 7.11% for the Dutch guilder and 6.92% for the deutschemark. Overall stock selection was positive. Substantial value was added by Japanese stock selection, while selection in the other markets detracted from performance. ------------------------------------------------------------ 6 NON-U.S. EQUITY FUND - -------------------------------------------------------------------------------- LOGO TOTAL RETURN
6 months 1 year Annualized ended ended 8/31/93* 6/30/96 6/30/96 to 6/30/96 - ------------------------------------------------------------------------ BRINSON NON-U.S. EQUITY FUND 7.00% 23.64% 6.80% MSCI Non-U.S. Equity (Free) Index (currency unhedged)** 4.82 13.61 8.03 MSCI Non-U.S. Equity (Free) Index (currency hedged)** 9.96 30.97 7.81 - ------------------------------------------------------------------------
*Inception date of the Brinson Non-U.S. Equity Fund **Performance is net of withholding taxes on dividends. Total return includes reinvestment of all capital gain and income distributions. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $100,000 This chart shows the growth No adjustment has been made in the value of an for any income taxes payable investment in the Brinson by shareholders on income Non-U.S. Equity Fund and the dividends and capital gain MSCI Non-U.S. Equity (Free) distributions. Past Index (currency unhedged and performance is no guarantee hedged) if you had invested of future results. Share $100,000 on August 31, 1993, price and return will vary and had reinvested all your with market conditions; income dividends and capital investors may realize a gain gain distributions through or loss upon redemption. June 30, 1996. BRINSON NON-U.S. EQUITY FUND VS. MSCI NON-U.S. EQUITY (FREE) INDEX (CURRENCY UNHEDGED AND HEDGED) Wealth Value with Dividends Reinvested [CHART APPEARS HERE] 8/31/93 6/30/96 -------- -------- Brinson Non-U.S. Equity Fund $100,000 $120,489 MSCI Non-U.S. Equity (Free) Index (currency unhedged) $100,000 $124,467 MSCI Non-U.S. Equity (Free) Index (currency hedged) $100,000 $123,756 Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. ------------------------------------------------------------- 7 NON-U.S. EQUITY FUND - -------------------------------------------------------------------------------- LOGO INDUSTRY DIVERSIFICATION As a Percent of Net Assets As of June 30, 1996 - -------------------------------------------------------------------------------- NON-U.S. EQUITIES Aerospace & Military..................................................... 0.26% Airlines................................................................. 0.11 Appliances & Household Durables.......................................... 2.73 Automobiles.............................................................. 2.90 Banking.................................................................. 11.09 Beverages & Tobacco...................................................... 2.51 Broadcasting & Publishing................................................ 1.16 Building Materials....................................................... 1.13 Business & Public Service................................................ 3.42 Chemicals................................................................ 4.09 Construction............................................................. 2.22 Data Processing.......................................................... 1.08 Electric Components...................................................... 1.25 Electronics.............................................................. 4.05 Energy................................................................... 8.03 Financial Services....................................................... 1.14 Food & House Products.................................................... 4.39 Forest Products.......................................................... 1.60 Gold Mining.............................................................. 0.15 Health & Personal Care................................................... 3.19 Industrial Components.................................................... 2.40 Insurance................................................................ 3.71 Leisure & Tourism........................................................ 1.07 - --------------------------------------------------------------------------------
Machinery & Engineering................................................ 1.63% Merchandising.......................................................... 4.61 Metals................................................................. 1.10 Miscellaneous Materials................................................ 1.45 Multi-Industry......................................................... 3.47 Non-Ferrous Metals..................................................... 1.88 Real Estate............................................................ 0.38 Recreation............................................................. 0.66 Shipping............................................................... 0.67 Steel.................................................................. 0.79 Telecommunications..................................................... 4.10 Textiles & Apparel..................................................... 0.29 Transportation......................................................... 0.93 Utilities.............................................................. 5.32 ------ Total Non-U.S. Equities.............................................. 90.96* ------ SHORT-TERM INVESTMENTS................................................. 7.00* ------ TOTAL INVESTMENTS.................................................... 97.96 CASH AND OTHER ASSETS, LESS LIABILITIES...................................................... 2.04 ------ NET ASSETS........................................................... 100.00% ======
MARKET AND CURRENCY STRATEGY As of June 30, 1996
Portfolio ----------------- Market Currency Strategy Strategy Index - --------------------------------------- U.S. Dollar 0.0% 39.0% 0.0% Japan 31.5 20.0 38.0 Australia 4.6 2.7 2.6 Belgium 2.9 0.4 1.1 Canada 3.3 3.3 3.8 Finland 0.6 0.6 0.5 France 9.2 0.6 6.3 Germany 6.1 0.6 6.5 Hong Kong 0.0 0.0 3.2 Italy 3.0 6.6 2.6 Malaysia 2.4 2.4 2.4 Netherlands 6.1 0.0 4.0 New Zealand 3.0 3.0 0.4 Spain 3.1 3.1 1.8 Sweden 0.0 0.0 2.1 Switzerland 2.3 0.8 5.6 U.K. 16.9 16.9 15.5 Cash Reserves 5.0 0.0 0.0 Other Markets 0.0 0.0 3.6 - --------------------------------------- 100.0% 100.0% 100.0%
TOP TEN NON-U.S. EQUITY HOLDINGS As of June 30, 1996 Percent of Net Assets - ----------------------- 1. Royal Dutch Petroleum Co. 1.80% 2. Matsushita Electric Industrial Co. 1.38 3. Toray Industries, Inc. 1.31 4. Ito Yokado Co. 1.30 5. Lloyds TSB Group PLC 1.14 6. General Electric PLC 1.13 7. Sekisui House Ltd. 1.02 8. Bank of Tokyo - Mitsubishi Ltd. 0.99 9. Broken Hill Proprietary Co. Ltd. 0.98 10. Sumitomo Bank 0.95 - ---------------------------------------------
*The Fund held a long position in Topix futures on June 30, 1996 which increased Japanese equity exposure from 30.27% to 31.22% and decreased the Fund's exposure to Short-Term Investments from 7.00% to 6.05% ------------------------------------------------------------ 8 NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - --------------------------------------------------------------------------------
SHARES VALUE ------- ------------ Non-U.S. Equities -- 90.96% AUSTRALIA -- 4.03% Amcor Ltd................................................. 68,700 $ 467,733 ANZ Banking Group Ltd. ................................... 84,819 401,897 Boral Ltd. ............................................... 100,000 259,740 Broken Hill Proprietary Co. Ltd. ......................... 151,270 2,091,943 CRA Ltd. ................................................. 52,210 803,800 David Jones Ltd. ......................................... 238,600 330,528 Lend Lease Corp. Ltd. .................................... 42,578 653,500 M.I.M. Holdings Ltd. ..................................... 205,900 265,782 National Australia Bank Ltd. ............................. 86,448 799,500 News Corp. Ltd. .......................................... 83,000 471,019 Pacific Dunlop Ltd. ...................................... 123,700 278,459 Qantas Airways Ltd. ...................................... 135,847 229,887 Santos Ltd................................................ 139,900 484,502 WMC Ltd. ................................................. 46,700 334,490 Westpac Banking Corp. Ltd. ............................... 165,851 734,940 ------------ 8,607,720 ------------ BELGIUM -- 2.69% Delhaize-Le Lion, S.A. ................................... 7,500 374,654 Electrabel S.A. .......................................... 5,165 1,102,938 Fortis AG................................................. 3,710 486,710 Groupe Bruxelles Lambert S.A. ............................ 3,030 379,126 Kredietbank NV............................................ 2,910 870,337 Petrofina S.A. ........................................... 2,575 807,130 Societe Generale de Belgique.............................. 3,428 259,872 Solvay S.A. Class A....................................... 935 573,763 Tractebel................................................. 1,350 552,645 Union Miniere Group S.A. (b).............................. 4,380 335,537 ------------ 5,742,712 ------------ CANADA -- 3.33% Alcan Aluminium Ltd. ..................................... 19,100 581,140 Bank of Montreal.......................................... 35,100 858,480 Barrick Gold Corp. ....................................... 11,600 314,719 Canadian Pacific Ltd. .................................... 43,600 954,628 Imperial Oil Ltd. ........................................ 15,800 666,432 Moore Corp. Ltd. ......................................... 7,400 138,452 Noranda, Inc. ............................................ 15,500 317,242 Norcen Energy Resources Ltd. ............................. 17,400 305,163 Northern Telecom Ltd. .................................... 9,100 494,782 NOVA Corp. ............................................... 28,400 256,839 Royal Bank of Canada...................................... 26,000 623,535 Seagram Co. Ltd. ......................................... 16,200 542,728 Thomson Corp. ............................................ 42,900 678,559 TransCanada Pipelines Ltd. ............................... 26,000 385,545 ------------ 7,118,244 ------------ FINLAND -- 0.50% Merita Ltd. Class A (b)................................... 42,000 87,690 Nokia Ab Class A.......................................... 16,000 588,906 Outokumpu Class A......................................... 6,500 109,129 UPM-Kymmene Corp. (b)..................................... 14,000 289,589 ------------ 1,075,314 ------------
SHARES VALUE ------- ----------- FRANCE -- 8.53% Accor S.A. ................................................. 5,070 $ 709,091 Alcatel Alsthom............................................. 6,814 594,306 Banque Nationale de Paris................................... 25,930 910,169 CEP Communications.......................................... 4,600 388,695 CEP Communications Warrants "97" (b)........................ 4,400 12,820 Cie Bancaire S.A. .......................................... 5,988 674,639 Cie de Saint Gobain......................................... 8,520 1,140,303 Cie de Suez................................................. 10,427 381,392 Cie Generale des Eaux....................................... 12,519 1,398,295 Colas....................................................... 1,977 354,078 Credit Local de France...................................... 11,850 964,481 Elf Aquitaine S.A. ......................................... 12,734 936,498 GAN (b)..................................................... 3,480 93,287 LVMH........................................................ 7,115 1,687,532 Michelin Class B............................................ 14,700 718,438 Pechiney S.A. Class A....................................... 12,711 513,329 Peugeot S.A. ............................................... 12,680 1,697,071 Rhone-Poulenc Class A....................................... 28,000 735,897 Sanofi...................................................... 1 75 SEITA....................................................... 8,400 385,082 Societe Generale............................................ 12,040 1,323,745 Total S.A. Class B.......................................... 20,360 1,509,994 UAP......................................................... 21,191 430,159 Usinor Sacilor.............................................. 45,400 654,808 ----------- 18,214,184 ----------- GERMANY -- 5.86% Allianz AG Holding.......................................... 728 1,265,546 BASF AG..................................................... 1,883 536,286 Bayer AG.................................................... 25,440 895,021 Bayerische Motoren Werke AG................................. 1,400 808,488 Bayerische Vereinsbank AG................................... 13,314 372,628 Commerzbank AG.............................................. 1,964 406,194 Daimler-Benz AG (b)......................................... 1,010 541,794 Daimler-Benz AG Rights (b).................................. 1,010 139 Deutsche Bank AG............................................ 29,757 1,409,553 Hoechst AG.................................................. 13,080 441,700 Kaufhof Holding AG.......................................... 1,472 556,362 M.A.N. AG................................................... 800 200,513 Mannesmann AG............................................... 2,877 990,440 Muenchener Rueckver AG...................................... 422 862,243 Muenchener Rueckver AG Warrants "98" (b).................... 12 1,490 Preussag AG................................................. 2,169 546,489 RWE AG...................................................... 13,500 525,064 Schering AG................................................. 5,242 380,037 Siemens AG.................................................. 6,000 321,582 Thyssen AG.................................................. 3,400 622,101 Veba AG..................................................... 15,588 828,506 ----------- 12,512,176 ----------- ITALY -- 2.55% Assicurazioni Generali...................................... 26,500 611,093 Danieli & Co. Savings (Risp)................................ 49,000 174,207 Edison Spa.................................................. 57,000 343,944 ENI ADR (c)................................................. 22,100 1,105,000 Fiat Spa-Priv............................................... 231,000 405,355 INA-Istituto Nazionale de Assicurazioni..................... 89,000 132,662
- -------------------------------------------------------------------------------- 9 NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - --------------------------------------------------------------------------------
SHARES VALUE ------- ------------ ITALY (CONTINUED) Istituto Mobilaire Italiano Spa........................... 67,000 $ 559,444 Italgas Spa............................................... 95,000 354,790 La Rinascente............................................. 27,000 193,304 La Rinascente Savings (Risp).............................. 29,000 80,400 La Rinascente Warrants "99" (b)........................... 2,800 2,280 Mediobanca Spa............................................ 15,000 95,257 Montedison Spa (b)........................................ 242,000 140,658 SAI-Savings (Risp)........................................ 37,000 143,371 Telecom Italia Spa........................................ 357,000 615,979 Telecom Italia Mobile Spa................................. 357,000 486,728 ------------ 5,444,472 ------------ JAPAN -- 30.27% Amada Co. Ltd. ........................................... 101,000 1,086,602 Asahi Glass Co. Ltd. ..................................... 120,000 1,433,242 Bank of Tokyo-Mitsubishi Ltd. ............................ 90,600 2,106,374 Canon, Inc................................................ 86,000 1,787,723 Canon Sales Co., Inc. .................................... 31,000 862,042 Citizen Watch Co. Ltd. ................................... 92,000 765,818 Dai Nippon Printing Co. Ltd. ............................. 91,000 1,758,913 Daiichi Pharmaceutical Co. Ltd............................ 63,000 970,721 Daikin Industries ltd..................................... 95,000 1,039,374 Daiwa House Industry Co. Ltd.............................. 48,000 743,973 Fanuc..................................................... 40,100 1,594,035 Fujitsu................................................... 57,000 519,687 Hitachi Ltd............................................... 195,000 1,813,434 Honda Motor Co............................................ 43,000 1,113,407 Inax...................................................... 126,000 1,252,172 Isetan.................................................... 32,000 484,312 Ito Yokado Co. Ltd........................................ 46,000 2,772,211 Kaneka Corp............................................... 50,000 335,973 Keio Teito Electric Railway............................... 113,000 669,667 Kinki Nippon Railway...................................... 114,000 820,066 Kirin Brewery Co. Ltd..................................... 108,000 1,319,458 Kokuyo.................................................... 20,000 552,509 Kuraray Co. Ltd........................................... 88,000 986,858 Maeda Road Construction................................... 22,000 379,098 Marui Co. Ltd............................................. 13,000 288,016 Matsushita Electric Industrial Co......................... 158,000 2,938,693 Mitsubishi Paper Mills.................................... 118,000 736,953 NGK Insulators............................................ 161,000 1,805,502 Nintendo Corp. Ltd........................................ 8,500 632,377 Nippon Denso Co. Ltd...................................... 65,000 1,410,449 Nippon Meat Packers, Inc.................................. 61,000 867,604 Nippon Steel Co........................................... 76,000 260,536 Okumura................................................... 68,000 567,899 Orix Corp................................................. 2,000 74,033 Osaka Gas Co.............................................. 408,000 1,491,666 Pioneer Electronic Corp................................... 16,000 380,739 Sankyo Co. Ltd. .......................................... 73,000 1,890,202 Secom..................................................... 23,000 1,518,215 Seino Transportation...................................... 33,000 520,508 Sekisui House Ltd......................................... 192,000 2,188,156 Shinmaywa Industries Ltd. ................................ 87,000 888,391 Sony Corp................................................. 30,600 2,011,517 Sumitomo Bank............................................. 105,000 2,029,515 Sumitomo Electric Industries.............................. 82,000 1,173,763
SHARES VALUE --------- ------------ Takeda Chemical Industries.............................. 71,000 $ 1,255,819 TDK Corp................................................ 18,000 1,073,291 Tokio Marine & Fire Insurance Co........................ 91,000 1,211,327 Tokyo Electric Power.................................... 43,500 1,102,557 Tokyo Steel Mfg......................................... 72,700 1,425,082 Tonen Corp.............................................. 69,000 1,012,843 Toray Industries, Inc................................... 407,000 2,805,325 Toshiba Corp............................................ 233,000 1,656,981 Toyo Suisan Kaisha...................................... 52,000 635,295 Toyota Motor Corp....................................... 30,000 749,443 Yamazaki Baking Co. Ltd. ............................... 48,000 888,391 ------------ 64,658,757 ------------ MALAYSIA -- 2.39% Genting Bhd............................................. 28,000 218,820 Hume Industries (Malaysia) Bhd.......................... 64,000 312,921 Kuala Lumpur Kepong Bhd................................. 141,000 356,004 Land & General Holdings Bhd............................. 125,500 309,324 Malayan Banking Bhd..................................... 59,000 567,490 Malaysia International Shipping Bhd (Frgn.)............. 81,000 251,583 Nestle (Malaysia) Bhd................................... 36,000 289,997 Public Bank Bhd (Frgn.)................................. 144,000 398,204 Resorts World Bhd....................................... 39,000 223,509 Sime Darby Bhd.......................................... 197,000 544,766 Telekom Malaysia Bhd.................................... 87,000 774,046 Tenaga Nasional Bhd..................................... 162,000 681,709 YTL Corp. Bhd........................................... 34,000 177,140 ------------ 5,105,513 ------------ NETHERLANDS -- 6.07% ABN AMRO Holdings NV.................................... 23,087 1,238,953 Akzo Nobel NV........................................... 2,000 239,616 DSM NV.................................................. 4,150 412,107 Hoogovens NV............................................ 5,600 207,347 ING Groep NV............................................ 56,811 1,694,112 KPN NV.................................................. 29,790 1,127,444 Philips Electronics NV.................................. 15,200 494,229 Royal Dutch Petroleum Co................................ 24,830 3,834,547 Royal Dutch Petroleum Co. NY Shares (c)................. 6,200 953,250 Unilever NV............................................. 11,740 1,698,857 Vendex International NV................................. 15,800 550,764 VNU-Ver Ned Uitgevers................................... 33,500 520,095 ------------ 12,971,321 ------------ NEW ZEALAND -- 2.71% Brierley Investments Ltd................................ 1,017,600 962,039 Carter Holt Harvey Ltd.................................. 608,600 1,388,394 Fletcher Challenge Building............................. 151,550 295,895 Fletcher Challenge Energy............................... 151,550 334,309 Fletcher Challenge Forest Ltd........................... 70,445 87,350 Fletcher Challenge Paper................................ 229,100 442,599 Telecom Corp. of New Zealand Ltd........................ 10,500 700,875 Telecom Corp. of New Zealand Ltd. ADS (c)............... 376,200 1,577,272 ------------ 5,788,733 ------------
- -------------------------------------------------------------------------------- 10 NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - --------------------------------------------------------------------------------
SHARES VALUE ------- ------------ SPAIN -- 2.97% Banco Bilbao-Vizcaya S. A.................................. 10,300 $ 416,946 Banco Central Hispanoamericano............................. 9,430 191,967 Banco Intercontinental Espanol S.A......................... 4,420 494,019 Banco Popular Espanol S.A.................................. 2,480 441,797 Banco Santander S.A........................................ 9,500 443,098 Cia Sevillana de Electricidad.............................. 45,900 422,444 Empresa Nacional de Electridad S.A......................... 12,800 797,686 Fomento de Construcciones y Contratas S.A.................. 3,800 314,170 Iberdrola S.A.............................................. 83,600 857,447 Repsol S.A................................................. 1,200 41,697 Repsol S.A. ADR (c)........................................ 15,500 538,625 Telefonica de Espana....................................... 57,900 1,065,775 Vallehermosa S.A........................................... 7,700 151,945 Viscofan Envolturas Celulosicas S.A........................ 11,300 178,475 ------------ 6,356,091 ------------ SWITZERLAND -- 2.41% ABB AG (Bearer)............................................ 210 259,732 Ciba-Geigy AG (Reg.)....................................... 653 795,642 CS Holdings AG (Reg.)...................................... 5,278 501,823 Nestle S.A. (Reg.)......................................... 1,251 1,428,315 Roche Holding AG (Gen.).................................... 99 754,998 Schweiz Bankgesellschaft (Bearer).......................... 560 548,097 Societe Generale de Surveillance S.A. (Bearer)............. 190 454,658 Zurich Versicherungs (Reg.)................................ 1,491 406,225 ------------ 5,149,490 ------------ UNITED KINGDOM -- 16.65% Asda Group PLC............................................. 152,200 275,545 Bass PLC................................................... 91,500 1,150,326 B.A.T. Industries PLC...................................... 124,000 965,408 Booker PLC................................................. 44,500 260,707 British Gas PLC............................................ 400,300 1,113,500 British Petroleum Co. PLC.................................. 218,123 1,913,449 British Steel PLC.......................................... 336,000 858,928 British Telecommunications PLC............................. 377,200 2,028,146 Charter PLC................................................ 49,449 713,111 Coats Viyella PLC.......................................... 229,100 612,357 FKI PLC.................................................... 187,625 495,668 General Electric Co. PLC................................... 447,700 2,414,171 Glaxo Wellcome PLC......................................... 61,500 828,124 Grand Metropolitan PLC..................................... 248,700 1,650,270 Guinness PLC............................................... 197,200 1,434,182 Hanson PLC................................................. 225,500 632,521 Hillsdown Holdings PLC..................................... 182,900 494,555 House of Fraser PLC........................................ 358,800 970,182 Legal and General Group PLC................................ 56,000 582,191 Lloyds Abbey Life PLC...................................... 79,100 628,129 Lloyds TSB Group PLC....................................... 496,185 2,428,878 Marks & Spencer PLC........................................ 116,900 854,723 Mirror Group PLC........................................... 129,600 412,867
SHARES VALUE ------- ------------ National Power PLC........................................ 93,500 $ 755,556 National Westminster Bank PLC............................. 111,500 1,067,350 Ocean Group PLC........................................... 73,800 524,112 Peninsular & Oriental Steam Navigation Co................. 85,700 647,245 Reckitt & Colman PLC...................................... 64,575 678,364 Redland PLC............................................... 45,600 284,158 RJB Mining PLC............................................ 72,000 618,741 Rolls-Royce PLC........................................... 156,500 544,771 Royal Insurance Holdings PLC.............................. 87,300 539,944 RTZ Corp. PLC............................................. 50,800 752,329 Scottish Hydro-Electric PLC............................... 68,800 316,469 Sears PLC................................................. 384,700 591,846 Sedgwick Group PLC........................................ 258,000 553,287 SmithKline Beecham PLC.................................... 70,800 757,510 Tesco PLC................................................. 226,900 1,036,653 Thames Water PLC.......................................... 74,600 657,315 Unilever PLC.............................................. 35,200 700,171 Vodafone Group PLC........................................ 96,500 359,907 W.H. Smith Group PLC...................................... 62,500 461,344 ------------ 35,565,010 ------------ Total Non-U.S. Equities (Cost $181,044,716)...................................... 194,309,737 ------------
FACE AMOUNT VALUE ------------ ------------ Short-Term Investments -- 7.00% COMMERCIAL PAPER -- 7.00% Airtouch Communications, Inc. 5.480%, due 07/01/96................................ $ 1,000,000 $ 1,000,000 5.500%, due 07/01/96................................ 945,000 945,000 Baxter International, Inc. 5.550%, due 07/10/96................................ 2,000,000 1,997,225 Dial Corp. 5.550%, due 07/17/96...................... 1,000,000 997,533 FMC Corp. 5.480%, due 07/08/96....................... 1,200,000 1,198,722 GATX Capital Corp. 5.500%, due 07/09/96................................ 1,750,000 1,747,861 Kerr-McGee Credit Corp. 5.500%, due 07/09/96................................ 1,750,000 1,747,861 The Limited, Inc. 5.650%, due 07/01/96................................ 2,000,000 2,000,000 Lockheed Martin Corp. 5.630%, due 07/01/96................................ 832,000 832,000 Melville Corp. 5.650%, due 07/01/96.................. 2,500,000 2,500,000 ------------ Total Short-Term Investments (Cost $14,966,202).................................. 14,966,202 ------------ Total Investments (Cost $196,010,918) -- 97.96% (a)................... 209,275,939 ------------ Cash and other assets, less liabilities -- 2.04%........................... 4,352,390 ------------ Net Assets -- 100%................................... $213,628,329 ============
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 11 NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $196,010,918; net unrealized appreciation consisted of: Gross unrealized appreciation................................ $18,350,459 Gross unrealized depreciation................................ (5,085,438) ----------- Net unrealized appreciation................................ $13,265,021 ===========
(b) Non-income producing security (c) Denominated in U.S. dollars FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4) The Non-U.S. Equity Fund had the following open forward foreign currency contracts as of June 30, 1996:
SETTLEMENT LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) ---------- -------------- ----------- ---------- FORWARD FOREIGN CURRENCY BUY CONTRACTS British Pound........... 08/20/96 1,700,000 $ 2,639,327 $ 34,417 Italian Lira............ 08/20/96 11,400,000,000 7,388,147 338,472 FORWARD FOREIGN CURRENCY SALE CONTRACTS Australian Dollar....... 08/20/96 4,400,00 3,457,136 (30,328) Belgian Franc........... 08/20/96 145,000,000 4,642,492 163,864 British Pound........... 08/20/96 1,700,000 2,639,327 (40,325) Dutch Guilder........... 08/20/96 19,800,000 11,642,173 449,694 French Franc............ 08/20/96 84,900,000 16,529,282 230,752 German Mark............. 08/20/96 16,600,000 10,938,140 423,315 Japanese Yen............ 08/20/96 2,435,000,000 22,357,865 329,733 Swiss Franc............. 08/20/96 3,600,000 2,888,002 165,951 ---------- Total................. $2,065,545 ========== FUTURES CONTRACTS (NOTE 5) The Non-U.S. Equity Fund had the following open index futures contracts as of June 30, 1996: SETTLEMENT CURRENT UNREALIZED DATE COST VALUE GAIN ---------- -------------- ----------- ---------- INDEX FUTURES BUY CON- TRACTS Topix, 13 contracts..... Sept. 1996 $ 2,007,816 $ 2,027,965 $ 20,149 ==========
The segregated cash pledged to cover margin requirements for the open positions at June 30, 1996 was $528,401. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 12 NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1996 ASSETS: Investments, at value (Cost $196,010,918) (Note 1)............... $209,275,939 Cash............................................................. 675,750 Foreign currency, at value (Cost $1,251,418)..................... 1,234,254 Receivables: Investment securities sold...................................... 132,264 Dividends....................................................... 921,822 Variation margin (Note 5)....................................... 20,149 Fund shares sold................................................ 383,610 Net unrealized appreciation on forward foreign currency con- tracts.......................................................... 2,065,545 Other assets..................................................... 53,522 ------------ TOTAL ASSETS.................................................. 214,762,855 ------------ LIABILITIES: Payables: Investment securities purchased................................. 853,302 Fund shares redeemed............................................ 6,371 Investment advisory fees (Note 2)............................... 105,026 Accrued expenses................................................ 169,827 ------------ TOTAL LIABILITIES............................................. 1,134,526 ------------ NET ASSETS........................................................ $213,628,329 ============ NET ASSETS CONSIST OF: Paid in capital (Note 7)......................................... $189,936,001 Accumulated undistributed net investment income.................. 785,599 Accumulated net realized gain.................................... 7,570,744 Net unrealized appreciation...................................... 15,335,985 ------------ NET ASSETS.................................................... $213,628,329 ============ OFFERING PRICE PER SHARE: Brinson Class: Net asset value, offering price and redemption price per share (Based on net assets of $212,365,969 and 19,010,079 shares is- sued and outstanding) (Note 7)................................. $ 11.17 ============ SwissKey Class: Net asset value, offering price and redemption price per share (Based on net assets of $1,262,360 and 113,519 shares issued and outstanding) (Note 7)...................................... $ 11.12 ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 13 NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1996 INVESTMENT INCOME: Dividends (net of $514,189 for foreign taxes withheld)........... $ 3,856,097 Interest......................................................... 1,167,297 ----------- TOTAL INCOME.................................................. 5,023,394 ----------- EXPENSES: Advisory (Note 2)................................................ 1,403,109 Accounting....................................................... 130,116 Custodian........................................................ 128,212 Administration................................................... 119,433 Distribution (Note 6)............................................ 3,544 Other............................................................ 325,926 ----------- TOTAL EXPENSES................................................ 2,110,340 Expenses waived by Advisor (Note 2)........................... (352,910) ----------- NET EXPENSES.................................................. 1,757,430 ----------- NET INVESTMENT INCOME ........................................ 3,265,964 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain on: Investments..................................................... 5,732,039 Futures contracts............................................... 2,389,926 Foreign currency transactions................................... 14,138,848 ----------- Net realized gain............................................. 22,260,813 ----------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency ............................... 9,461,343 Futures contracts .............................................. 20,149 Forward contracts............................................... 1,441,930 Translation of other assets and liabilities denominated in for- eign currency.................................................. (4,433) ----------- Change in net unrealized appreciation or depreciation......... 10,918,989 ----------- Net realized and unrealized gain.................................. 33,179,802 ----------- Net increase in net assets resulting from operations.............. $36,445,766 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 14 NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
YEAR YEAR ENDED ENDED JUNE 30, 1996 JUNE 30, 1995 ------------- ------------- OPERATIONS: Net investment income............................ $ 3,265,964 $ 2,518,556 Net realized gain (loss)......................... 22,260,813 (5,050,764) Change in net unrealized appreciation or depreci- ation .......................................... 10,918,989 2,039,362 ------------ ------------ Net increase (decrease) in net assets resulting from operations................................. 36,445,766 (492,846) ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class................................... (3,057,609) -- SwissKey Class.................................. (8,629) -- Distributions from net realized gain: Brinson Class................................... (8,632,717) -- SwissKey Class.................................. (14,731) -- ------------ ------------ Total distributions to shareholders............. (11,713,686) -- ------------ ------------ CAPITAL SHARE TRANSACTIONS: Shares sold...................................... 86,752,018 110,628,882 Shares issued on reinvestment of distributions... 10,473,903 -- Shares redeemed.................................. (56,648,208) (33,361,344) ------------ ------------ Net increase in net assets resulting from capital share transactions (Note 7)..................... 40,577,713 77,267,538 ------------ ------------ TOTAL INCREASE IN NET ASSETS................... 65,309,793 76,774,692 ------------ ------------ NET ASSETS: Beginning of year................................ 148,318,536 71,543,844 ------------ ------------ End of year (including accumulated undistributed net investment income of $785,599 and $632,906, respectively)................................... $213,628,329 $148,318,536 ============ ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 15 NON-U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
YEAR YEAR AUGUST 31, 1993* ENDED ENDED THROUGH BRINSON CLASS JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994 - ------------------------------------------------------------------------------- Net asset value, beginning of pe- riod............................. $ 9.68 $ 9.69 $ 10.00 -------- -------- ------- Income from investment opera- tions: Net investment income........... 0.18 0.15 0.10 Net realized and unrealized gain (loss)......................... 2.05 (0.16) (0.34) -------- -------- ------- Total income (loss) from in- vestment operations.......... 2.23 (0.01) (0.24) -------- -------- ------- Less distributions: Distributions from net invest- ment income.................... (0.18) -- (0.07) Distributions from net realized gain........................... (0.56) -- -- -------- -------- ------- Total distributions........... (0.74) -- (0.07) -------- -------- ------- Net asset value, end of period.... $ 11.17 $ 9.68 $ 9.69 ======== ======== ======= Total return (non-annualized)..... 23.64% (0.10%) (2.45%) Ratios/Supplemental data Net assets, end of period (in 000s)........................... $212,366 $148,319 $71,544 Ratio of expenses to average net assets: Before expense reimbursement.... 1.20% 1.23% 1.60%** After expense reimbursement..... 1.00% 1.00% 1.00%** Ratio of net investment income to average net assets: Before expense reimbursement.... 1.67% 1.93% 1.28%** After expense reimbursement..... 1.87% 2.16% 1.88%** Portfolio turnover rate.......... 20% 14% 12% Average commission rate paid per share........................... $ 0.0219 N/A N/A
* Commencement of investment operations ** Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 16 NON-U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout the period presented.
JULY 31, 1995* THROUGH SWISSKEY CLASS JUNE 30, 1996 - -------------------------------------------------------------------------------- Net asset value, beginning of period............................. $ 10.26 ------- Income from investment operations: Net investment income.......................................... 0.12 Net realized and unrealized gain............................... 1.45 ------- Total income from investment operations...................... 1.57 ------- Less distributions: Distributions from net investment income....................... (0.15) Distributions from net realized gain........................... (0.56) ------- Total distributions.......................................... (0.71) ------- Net asset value, end of period................................... $ 11.12 ======= Total return (non-annualized).................................... 15.78% Ratios/Supplemental data Net assets, end of period (in 000s)............................. $ 1,262 Ratio of expenses to average net assets: Before expense reimbursement................................... 2.04%** After expense reimbursement.................................... 1.84%** Ratio of net investment income to average net assets: Before expense reimbursement................................... 0.83%** After expense reimbursement.................................... 1.03%** Portfolio turnover rate......................................... 20% Average commission rate paid per share.......................... $0.0219
* Commencement of SwissKey Class distribution ** Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 17 NON-U.S. EQUITY FUND -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1.SIGNIFICANT ACCOUNTING POLICIES The Brinson Funds (the "Trust") is an open-end, management investment company registered under the Investment Company Act of 1940, as amended, as a series company. The Trust currently offers shares of seven series: Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund and Non-U.S. Equity Fund. The Fund has two classes of shares outstanding, Brinson Class and SwissKey Class. There are an unlimited number of shares of each class with par value of $0.001 authorized. Each share of the Fund represents an identical interest in the investments of the Fund and has the same rights. The following is a summary of significant accounting policies consistently followed by the Non-U.S. Equity Fund (the "Fund") in the preparation of its financial statements. A.INVESTMENT VALUATION: Securities for which market quotations are readily available are valued at the last available sales price on the exchange or market on which they are principally traded, or lacking any sales, at the last available bid price on the exchange or market on which such securities are principally traded. Securities for which market quotations are not readily available, including restricted securities which are subject to limitations on their sale, are valued at fair value as determined in good faith by or under the direction of the Trust's Board of Trustees. Futures contracts are valued at the settlement price established each day on the exchange on which they are traded. Forward contracts are valued daily using quoted forward exchange rates. Short-term obligations with a maturity of 60 days or less are valued at amortized cost, which approximates market value. B.FOREIGN CURRENCY TRANSLATION: Investments and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the mean between the bid and offered quotations of such currencies against the U.S. dollar as of the date of valuation. Purchases and sales of portfolio securities, commitments under forward foreign currency contracts, income receipts and expense accruals are translated at the prevailing exchange rate on the date of each transaction. Realized and unrealized foreign exchange gains or losses on investments are included as a component of net realized and unrealized gain or loss in the statement of operations. C.INVESTMENT TRANSACTIONS: Investment transactions are accounted for on a trade date basis. Gains and losses on securities sold are determined on an identified cost basis. D.INVESTMENT INCOME: Interest income, which includes amortization of premiums and discounts, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities are recorded as the information becomes available. E.FEDERAL INCOME TAXES: It is the policy of the Fund to comply with all requirements of the Internal Revenue Code (the "Code") applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. The Fund has met the requirements of the Code applicable to regulated investment companies for the year ended June 30, 1996, therefore, no federal income tax provision was required. F.DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of the Fund to distribute its net investment income on a semi-annual basis and net capital gains, if any, annually. Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences are primarily due to differing treatments for foreign currency transactions. Differences in dividends per share between the classes are due to distribution expenses. G.INCOME AND EXPENSE ALLOCATION: All income earned and expenses incurred by the Fund will be borne on a pro rata basis by each of the classes, except that the Brinson Class shares will not incur any of the distribution expenses. H.USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. - -------------------------------------------------------------------------------- 18 NON-U.S. EQUITY FUND -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 2.INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES Brinson Partners, Inc. (the "Advisor"), a registered investment advisor, provides the Fund with investment management services. As compensation for these services, the Fund pays the Advisor a monthly fee based on the Fund's average daily net assets. The Advisor has agreed to waive its fees and reimburse the Fund to the extent total annualized expenses exceed a specified percentage of the Fund's average daily net assets. The expense cap is 1.00% and 1.84% of the average daily net assets of the Brinson Class and SwissKey Class, respectively. Investment advisory fees and other transactions with affiliates for the year ended June 30, 1996, were as follows:
ADVISORY ADVISORY FEES FEE FEES WAIVED -------- ---------- -------- Non-U.S. Equity Fund............................... 0.80% $1,403,109 $352,910
Certain officers of the Fund are also officers of the Advisor. All officers serve without direct compensation from the Fund. Trustees' fees paid to unaffiliated trustees were $6,836. 3.INVESTMENT TRANSACTIONS Investment transactions for the year ended June 30, 1996, excluding short-term investments, were as follows:
PROCEEDS PURCHASES FROM SALES ------------ ----------- Non-U.S. Equity Fund................................... $104,448,627 $61,894,241
4.FORWARD FOREIGN CURRENCY CONTRACTS The Fund engages in portfolio hedging with respect to changes in currency exchange rates by entering into forward foreign currency contracts to purchase or sell currencies. Forward foreign currency contracts are also used to achieve currency allocation strategies. A forward foreign currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. Risks associated with such contracts include movement in the value of the foreign currency relative to the U.S. dollar and the ability of the counterparty to perform. The unrealized gain, if any, represents the credit risk to the Fund on a forward foreign currency contract. Fluctuations in the value of forward foreign currency contracts are recorded daily as net unrealized gains or losses. The Fund realizes a gain or loss upon settlement of the contracts. The statement of operations reflects net realized and net unrealized gains and losses on these contracts. The counterparty to all forward foreign currency contracts, at and for the year ended June 30, 1996, was the Fund's custodian. 5.FUTURES CONTRACTS The Fund may purchase or sell exchange-traded futures contracts, which are contracts that obligate the Fund to make or take delivery of a financial instrument or the cash value of a securities index at a specified future date at a specified price. The Fund enters into such contracts to hedge a portion of its portfolio. Risks of entering into futures contracts include the possibility that there may be an illiquid market or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Fund is required to deposit either cash or securities (initial margin). Subsequent payments (variation margin) are made or received by the Fund, generally on a daily basis. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains or losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. The statement of operations reflects net realized and net unrealized gains and losses on these contracts. 6.DISTRIBUTION PLAN The Trust has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940. The Plan governs payments made for the expenses incurred in the promotion and distribution of the SwissKey Class of shares. Annual fees under the Plan, which include a 0.25% service fee, total 0.84% of the average daily net assets of the SwissKey Class. - -------------------------------------------------------------------------------- 19 NON-U.S. EQUITY FUND -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 7. CAPITAL TRANSACTIONS Capital stock transactions were as follows:
YEAR ENDED YEAR ENDED JUNE 30, 1996 JUNE 30, 1995 --------------------- ----------------------- SHARES VALUE SHARES VALUE --------- ----------- ---------- ------------ Sales: Brinson Class.................... 8,044,119 $85,398,213 11,370,317 $110,628,882 SwissKey Class................... 125,829 1,353,805 -- -- --------- ----------- ---------- ------------ Total Sales................... 8,169,948 $86,752,018 11,370,317 $110,628,882 ========= =========== ========== ============ Dividend Reinvestment: Brinson Class.................... 998,992 $10,452,496 -- -- SwissKey Class................... 2,042 21,407 -- -- --------- ----------- ---------- ------------ Total Dividend Reinvestment... 1,001,034 $10,473,903 -- -- ========= =========== ========== ============ Redemptions: Brinson Class.................... 5,347,882 $56,492,091 3,435,839 $ 33,361,344 SwissKey Class................... 14,352 156,117 -- -- --------- ----------- ---------- ------------ Total Redemptions............. 5,362,234 $56,648,208 3,435,839 $ 33,361,344 ========= =========== ========== ============
- -------------------------------------------------------------------------------- 20 REPORT OF INDEPENDENT AUDITORS - -------------------------------------------------------------------------------- The Board of Trustees and Shareholders The Brinson Funds--Non-U.S. Equity Fund We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of The Brinson Funds--Non-U.S. Equity Fund as of June 30, 1996, the related statements of operations for the year then ended and changes in net assets and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of June 30, 1996, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The Brinson Funds--Non-U.S. Equity Fund at June 30, 1996, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for the periods indicated therein, in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP ERNST & YOUNG LLP Chicago, Illinois August 9, 1996 - -------------------------------------------------------------------------------- 21 SPECIAL MEETING OF SHAREHOLDERS - -------------------------------------------------------------------------------- A Special Meeting of Shareholders was held on February 16, 1996. At the meeting, shareholders of the Fund were asked to consider and act upon amendments to the Trust's fundamental investment policies to (1) permit the Fund to invest in affiliated investment companies; (2) permit the Fund to enter into forward foreign currency transactions for non-hedging purposes; and (3) increase the limitation on permissible loans of portfolio securities from 25% to 33 1/3% of its assets. The results of all matters voted on by shareholders of the Fund at the Special Meeting held on February 16, 1996, were as follows: A. AMENDMENT TO THE TRUST'S FUNDAMENTAL INVESTMENT POLICIES TO PERMIT THE FUND TO INVEST IN AFFILIATED INVESTMENT COMPANIES:
For Against Abstain --------- --------- ------- Non- U.S. Equity Fund............................... 9,111,850 144,663 2,020 B. AMENDMENT TO THE TRUST'S FUNDAMENTAL INVESTMENT POLICIES TO PERMIT THE FUND TO ENTER INTO FORWARD FOREIGN CURRENCY TRANSACTIONS FOR NON-HEDGING PURPOSES: For Against Abstain --------- --------- ------- Non- U.S. Equity Fund............................... 7,927,862 1,328,651 2,020 C. AMENDMENT TO THE TRUST'S FUNDAMENTAL INVESTMENT POLICIES TO INCREASE THE LIMITATION ON PERMISSIBLE LOANS OF PORTFOLIO SECURITIES FROM 25% TO 33 1/3% OF ITS ASSETS: For Against Abstain --------- --------- ------- Non- U.S. Equity Fund............................... 8,914,286 291,422 52,825
- -------------------------------------------------------------------------------- 22 DISTRIBUTED BY: FUND/PLAN BROKER SERVICES, INC. 2 W. ELM STREET CONSHOHOCKEN, PA 19428 This report is submitted for the general information of the shareholders of the Fund. It is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective Prospectus which includes details regarding the Fund's objectives, policies, expenses and other information. - -------------------------------------------------------------------------------- THE BRINSON FUNDS - -------------------------------------------------------------------------------- 209 South LaSalle Street . Chicago, Illinois 60604-1295 . Tel: (800) 448-2430 [LOGO] SWISSKEY FUNDS SWISSKEY NON-U.S. EQUITY FUND ANNUAL REPORT JUNE 30, 1996 Your Key to Performance ----------------------------- TRUSTEES AND OFFICERS - -------------------------------------------------------------------------------- LOGO TRUSTEES Walter E. Auch Frank K. Reilly, CFA Edward M. Roob OFFICERS Frank K. Reilly, CFA Carolyn M. Burke, CPA Chairman of the Board Assistant Secretary Catherine E. Macrae E. Thomas McFarlan Assistant Secretary President and Treasurer Debra L. Nichols Thomas J. Digenan, CPA Assistant Secretary Assistant Treasurer Bruce G. Leto Secretary ------------------------------------------------------------ 1 THE FUND'S ADVISOR -- BRINSON PARTNERS, INC. - -------------------------------------------------------------------------------- LOGO Brinson Partners, Inc. is an institutional investment management firm structured around teams of investment specialists covering major world asset classes. We specialize in managing multiple asset portfolios that provide clients with the opportunity to participate in all major world asset classes. It is important that investment decisions, whether they pertain to a global portfolio or a single asset class portfolio, be made within the context of a global capital market perspective. Our coordinated application of investment strategies distinguishes Brinson Partners, Inc. as a leader in global investment management of institutional assets. We firmly believe that asset allocation is portfolio management at its highest and most important level. Performance is maximized through a comprehensive understanding of global investment markets and their interrelationships. Portfolio structure is tailored to specific client objectives and focused upon both risk and return considerations in the context of full long-term investment cycles. At Brinson Partners, Inc. our investment decisions are based on fundamental research, internally developed valuation systems and seasoned judgment. Our independent team approach allows for rapid responses to market changes, while providing each client with the benefit of our best talent and the flexibility to customize portfolios to meet unique requirements. ------------------------------------------------------------ 2 TABLE OF CONTENTS - -------------------------------------------------------------------------------- LOGO Shareholder Letter............................................................ 4 Global Economic and Market Highlights......................................... 5 Non-U.S. Equity Fund.......................................................... 6 Schedule of Investments....................................................... 9 Financial Statements..........................................................13 Financial Highlights..........................................................16 Notes to Financial Statements.................................................18 Report of Independent Auditors................................................21 Special Meeting of Shareholders...............................................22 ------------------------------------------------------------ 3 SHAREHOLDER LETTER - -------------------------------------------------------------------------------- LOGO August 19, 1996 Dear Shareholder: We appreciate the confidence you have placed in us and are pleased to present you with the June 30, 1996 Annual Report for the Non-U.S. Equity Fund. The SwissKey Funds provide you with the opportunity to invest in a diversified family of mutual funds specializing in global investing. One of the many benefits offered by these funds is management by Brinson Partners, Inc., the worldwide portfolio manager of Swiss Bank Corporation and leader in the trend toward global and non-U.S. portfolio management. Another benefit is the fact that you do not incur a sales charge upon purchasing or redeeming shares so your full investment works for you. We also offer toll-free access to investment information and free transfer of investments between funds. This Report presents our current global economic and market outlook, as well as the Fund's recent investment strategies and performance. To summarize this information: For the period from July 31, 1995 to June 30, 1996, the Fund provided an unannualized total return of 15.78%. In the first half of 1996, the Fund returned 6.63%. Market Strategy The Fund holds a 5% strategic cash position reflecting our view that, with very few exceptions, non-U.S. equity markets are modestly attractive. The Japanese equity market, which is the largest component of the index, is somewhat more overpriced than most of the other non-U.S. markets. Given our valuation analyses and fundamental considerations, we are underweight Japan by 6.5%. The other markets in the index are accordingly overweight by 1.5%. Currency Strategy Currency strategy continues to emphasize those currencies that offer the highest expected cash returns in U.S. dollar terms. We continue to have limited exposure to the overvalued DM-bloc currencies and maintain an underweight in the yen. Offsetting these underweights is a large overweight in the U.S. dollar (39.0%). Our position is near neutral in the British pound, and in the Australian and Canadian dollar. We look forward to the challenges ahead and, as always, welcome your thoughts and comments. Sincerely, /s/ Raoul Weil /s/ Raymond Simon Raoul Weil Raymond Simon Managing Director Executive Director Private Investors & Private Investors & Asset Management Asset Management ------------------------------------------------------------ 4 GLOBAL ECONOMIC AND MARKET HIGHLIGHTS - ------------------------------------------------------------------------------- LOGO Since the yen's peak in 1995, the Japanese economy has begun showing signs of recovery. Real GDP growth has recently turned up and output prices appear to have stopped falling. However, structural problems persist, as unemployment hit an all-time high in May. With continued slow economic growth through much of continental Europe, unem- ployment remains high. While the overpriced currencies of the deutschemark bloc are a contributing factor, structural rigidity and accompanying high la- bor costs exacerbate the problems. The U.S. continues to be a leader among de- veloped countries in productivity improvements and the restraint of labor costs. Price pressures in most countries remain subdued, due to continuing central bank responsibility. The last 15 years have seen a powerful trend toward a re- duction and convergence in inflation rates across countries. Nevertheless, bond markets have yet to fully accept a lower-inflation world. Any indication of potential price pressures, such as the recent strong employment reports in the U.S., adversely affects bond prices. NON-U.S. EQUITY ENVIRONMENT
MAJOR MARKETS Total Return in 6 months 1 year U.S. Dollar ended ended Hedged Terms 6/30/96 6/30/96 - -------------------------------------- Japan 10.23% 51.04% U.K. 2.20 14.41 Germany 12.38 21.40 France 17.54 19.52 Canada 9.60 14.15 Netherlands 20.20 38.76 Australia 0.01 6.53 - -------------------------------------- MAJOR CURRENCIES Percent Change 6 months 1 year Relative to ended ended U.S. Dollars 6/30/96 6/30/96 - --------------------------------- Yen -5.95% -22.60% Pound 0.08 -2.33 Deutschemark -5.97 -9.07 Canadian Dollar -0.13 0.60 - ---------------------------------
------------------------------------------------------------ 5 NON-U.S. EQUITY FUND - -------------------------------------------------------------------------------- LOGO The Non-U.S. Equity Fund invests in the common stocks of companies headquartered outside the U.S. We believe that in a non-U.S. investment program the country allocation decision is the most important. Currency strategies are separately developed and coordinated with market allocations. Our industry strategies and individual security selections are determined by fundamental research. Since its inception on July 31, 1995, the SwissKey Non-U.S. Equity Fund has earned an unannualized return of 15.78% versus 7.13% for the benchmark, the Morgan Stanley Capital International Non-U.S. Equity (Free) Index. For the first half of 1996, the SwissKey Non-U.S. Equity Fund returned 6.63% compared to the 4.82% return of the benchmark. In the first half of 1996, the best performing markets in dollar-hedged terms, with returns in the 17-20% region, were the Netherlands, Spain, France and Ireland. In general, non-U.S. markets were strong, in aggregate growing 9.96% in dollar-hedged terms. In sharp contrast, New Zealand declined 3.97%, while Australia was flat. Japan's 10.23% rise was about average, relative to the other non-U.S. markets and similar to the 10.92% increase in the U.S. market. Market allocation had a negative impact on returns. Cash detracted in an environment of strong market performance. Overweighting the weakly performing Anglo-Saxon markets and underweighting Hong Kong and Switzerland dampened returns. Currency management had a very significant positive impact on performance, accounting for most of the value added by the Fund. Our defensive strategies included a large underweight of the Japanese yen and minimal exposure to the DM-related currencies. These strategies proved highly successful in a period where the yen declined 8.24% and the DM-related currencies fell considerably; varying from 9.77% for the Swiss franc, 7.11% for the Dutch guilder and 6.92% for the deutschemark. Overall stock selection was positive. Substantial value was added by Japanese stock selection, while selection in the other markets detracted from performance. ------------------------------------------------------------ 6 NON-U.S. EQUITY FUND - -------------------------------------------------------------------------------- LOGO TOTAL RETURN
6 months ended Since 6/30/96 inception* - ------------------------------------------------------ SWISSKEY NON-U.S. EQUITY FUND 6.63% 15.78% MSCI Non-U.S. Equity (Free) Index 4.82 7.13 - ------------------------------------------------------
*Inception date of the SwissKey Non-U.S. Equity Fund is July 31, 1995. Total return includes reinvestment of all capital gain and income distributions. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $10,000 This chart shows the growth No adjustment has been made in the value of an for any income taxes payable investment in the SwissKey by shareholders on income Non-U.S. Equity Fund and the dividends and capital gain MSCI Non-U.S. Equity (Free) distributions. Past Index if you had invested performance is no guarantee $10,000 on July 31, 1995, of future results. Share and had reinvested all your price and return will vary income dividends and capital with market conditions; gain distributions through investors may realize a gain June 30, 1996. or loss upon redemption. SWISSKEY NON-U.S. EQUITY FUND VS. MSCI NON-U.S. EQUITY (FREE) INDEX Wealth Value with Dividends Reinvested [GRAPH APPEARS HERE] 7/31/95 6/30/96 ------- ------- SwissKey Non-U.S. Equity Fund $10,000 $11,578 MSCI Non-U.S. Equity (Free) Index $10,000 $10,713 Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. ------------------------------------------------------------- 7 NON-U.S. EQUITY FUND - -------------------------------------------------------------------------------- LOGO INDUSTRY DIVERSIFICATION As a Percent of Net Assets As of June 30, 1996 - --------------------------------------- NON-U.S. EQUITIES Aerospace & Military 0.26% Airlines 0.11 Appliances & Household Durables 2.73 Automobiles 2.90 Banking 11.09 Beverages & Tobacco 2.51 Broadcasting & Publishing 1.16 Building Materials 1.13 Business & Public Service 3.42 Chemicals 4.09 Construction 2.22 Data Processing 1.08 Electric Components 1.25 Electronics 4.05 Energy 8.03 Financial Services 1.14 Food & House Products 4.39 Forest Products 1.60 Gold Mining 0.15 Health & Personal Care 3.19 Industrial Components 2.40 Insurance 3.71 Leisure & Tourism 1.07 - ---------------------------------------
Machinery & Engineering 1.63% Merchandising 4.61 Metals 1.10 Miscellaneous Materials 1.45 Multi-Industry 3.47 Non-Ferrous Metals 1.88 Real Estate 0.38 Recreation 0.66 Shipping 0.67 Steel 0.79 Telecommunications 4.10 Textiles & Apparel 0.29 Transportation 0.93 Utilities 5.32 ------ Total Non-U.S. Equities 90.96* ------ SHORT-TERM INVESTMENTS 7.00* ------ TOTAL INVESTMENTS 97.96 CASH AND OTHER ASSETS, LESS LIABILITIES 2.04 ------ NET ASSETS 100.00% ======
MARKET AND CURRENCY STRATEGY As of June 30, 1996
Portfolio ----------------- Market Currency Strategy Strategy Index - --------------------------------------- U.S. Dollar 0.0% 39.0% 0.0% Japan 31.5 20.0 38.0 Australia 4.6 2.7 2.6 Belgium 2.9 0.4 1.1 Canada 3.3 3.3 3.8 Finland 0.6 0.6 0.5 France 9.2 0.6 6.3 Germany 6.1 0.6 6.5 Hong Kong 0.0 0.0 3.2 Italy 3.0 6.6 2.6 Malaysia 2.4 2.4 2.4 Netherlands 6.1 0.0 4.0 New Zealand 3.0 3.0 0.4 Spain 3.1 3.1 1.8 Sweden 0.0 0.0 2.1 Switzerland 2.3 0.8 5.6 U.K. 16.9 16.9 15.5 Cash Reserves 5.0 0.0 0.0 Other Markets 0.0 0.0 3.6 - --------------------------------------- 100.0% 100.0% 100.0%
TOP TEN NON-U.S. EQUITY HOLDINGS As of June 30, 1996
Percent of Net Assets - ----------------------- 1. Royal Dutch Petroleum Co. 1.80% 2. Matsushita Electric Industrial Co. 1.38 3. Toray Industries, Inc. 1.31 4. Ito Yokado Co. 1.30 5. Lloyds TSB Group PLC 1.14 6. General Electric PLC 1.13 7. Sekisui House Ltd. 1.02 8. Bank of Tokyo - Mitsubishi Ltd. 0.99 9. Broken Hill Proprietary Co. Ltd. 0.98 10. Sumitomo Bank 0.95 - ---------------------------------------------
*The Fund held a long position in Topix futures on June 30, 1996 which increased Japanese equity exposure from 30.27% to 31.22% and decreased the Fund's exposure to Short-Term Investments from 7.00% to 6.05% ------------------------------------------------------------ 8 NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - --------------------------------------------------------------------------------
SHARES VALUE ------- ------------ Non-U.S. Equities -- 90.96% AUSTRALIA -- 4.03% Amcor Ltd................................................. 68,700 $ 467,733 ANZ Banking Group Ltd. ................................... 84,819 401,897 Boral Ltd. ............................................... 100,000 259,740 Broken Hill Proprietary Co. Ltd. ......................... 151,270 2,091,943 CRA Ltd. ................................................. 52,210 803,800 David Jones Ltd. ......................................... 238,600 330,528 Lend Lease Corp. Ltd. .................................... 42,578 653,500 M.I.M. Holdings Ltd. ..................................... 205,900 265,782 National Australia Bank Ltd. ............................. 86,448 799,500 News Corp. Ltd. .......................................... 83,000 471,019 Pacific Dunlop Ltd. ...................................... 123,700 278,459 Qantas Airways Ltd. ...................................... 135,847 229,887 Santos Ltd................................................ 139,900 484,502 WMC Ltd. ................................................. 46,700 334,490 Westpac Banking Corp. Ltd. ............................... 165,851 734,940 ------------ 8,607,720 ------------ BELGIUM -- 2.69% Delhaize-Le Lion, S.A. ................................... 7,500 374,654 Electrabel S.A. .......................................... 5,165 1,102,938 Fortis AG................................................. 3,710 486,710 Groupe Bruxelles Lambert S.A. ............................ 3,030 379,126 Kredietbank NV............................................ 2,910 870,337 Petrofina S.A. ........................................... 2,575 807,130 Societe Generale de Belgique.............................. 3,428 259,872 Solvay S.A. Class A....................................... 935 573,763 Tractebel................................................. 1,350 552,645 Union Miniere Group S.A. (b).............................. 4,380 335,537 ------------ 5,742,712 ------------ CANADA -- 3.33% Alcan Aluminium Ltd. ..................................... 19,100 581,140 Bank of Montreal.......................................... 35,100 858,480 Barrick Gold Corp. ....................................... 11,600 314,719 Canadian Pacific Ltd. .................................... 43,600 954,628 Imperial Oil Ltd. ........................................ 15,800 666,432 Moore Corp. Ltd. ......................................... 7,400 138,452 Noranda, Inc. ............................................ 15,500 317,242 Norcen Energy Resources Ltd. ............................. 17,400 305,163 Northern Telecom Ltd. .................................... 9,100 494,782 NOVA Corp. ............................................... 28,400 256,839 Royal Bank of Canada...................................... 26,000 623,535 Seagram Co. Ltd. ......................................... 16,200 542,728 Thomson Corp. ............................................ 42,900 678,559 TransCanada Pipelines Ltd. ............................... 26,000 385,545 ------------ 7,118,244 ------------ FINLAND -- 0.50% Merita Ltd. Class A (b)................................... 42,000 87,690 Nokia Ab Class A.......................................... 16,000 588,906 Outokumpu Class A......................................... 6,500 109,129 UPM-Kymmene Corp. (b)..................................... 14,000 289,589 ------------ 1,075,314 ------------
SHARES VALUE ------- ----------- FRANCE -- 8.53% Accor S.A. ................................................. 5,070 $ 709,091 Alcatel Alsthom............................................. 6,814 594,306 Banque Nationale de Paris................................... 25,930 910,169 CEP Communications.......................................... 4,600 388,695 CEP Communications Warrants "97" (b)........................ 4,400 12,820 Cie Bancaire S.A. .......................................... 5,988 674,639 Cie de Saint Gobain......................................... 8,520 1,140,303 Cie de Suez................................................. 10,427 381,392 Cie Generale des Eaux....................................... 12,519 1,398,295 Colas....................................................... 1,977 354,078 Credit Local de France...................................... 11,850 964,481 Elf Aquitaine S.A. ......................................... 12,734 936,498 GAN (b)..................................................... 3,480 93,287 LVMH........................................................ 7,115 1,687,532 Michelin Class B............................................ 14,700 718,438 Pechiney S.A. Class A....................................... 12,711 513,329 Peugeot S.A. ............................................... 12,680 1,697,071 Rhone-Poulenc Class A....................................... 28,000 735,897 Sanofi...................................................... 1 75 SEITA....................................................... 8,400 385,082 Societe Generale............................................ 12,040 1,323,745 Total S.A. Class B.......................................... 20,360 1,509,994 UAP......................................................... 21,191 430,159 Usinor Sacilor.............................................. 45,400 654,808 ----------- 18,214,184 ----------- GERMANY -- 5.86% Allianz AG Holding.......................................... 728 1,265,546 BASF AG..................................................... 1,883 536,286 Bayer AG.................................................... 25,440 895,021 Bayerische Motoren Werke AG................................. 1,400 808,488 Bayerische Vereinsbank AG................................... 13,314 372,628 Commerzbank AG.............................................. 1,964 406,194 Daimler-Benz AG (b)......................................... 1,010 541,794 Daimler-Benz AG Rights (b).................................. 1,010 139 Deutsche Bank AG............................................ 29,757 1,409,553 Hoechst AG.................................................. 13,080 441,700 Kaufhof Holding AG.......................................... 1,472 556,362 M.A.N. AG................................................... 800 200,513 Mannesmann AG............................................... 2,877 990,440 Muenchener Rueckver AG...................................... 422 862,243 Muenchener Rueckver AG Warrants "98" (b).................... 12 1,490 Preussag AG................................................. 2,169 546,489 RWE AG...................................................... 13,500 525,064 Schering AG................................................. 5,242 380,037 Siemens AG.................................................. 6,000 321,582 Thyssen AG.................................................. 3,400 622,101 Veba AG..................................................... 15,588 828,506 ----------- 12,512,176 ----------- ITALY -- 2.55% Assicurazioni Generali...................................... 26,500 611,093 Danieli & Co. Savings (Risp)................................ 49,000 174,207 Edison Spa.................................................. 57,000 343,944 ENI ADR (c)................................................. 22,100 1,105,000 Fiat Spa-Priv............................................... 231,000 405,355 INA-Istituto Nazionale de Assicurazioni..................... 89,000 132,662
- -------------------------------------------------------------------------------- 9 NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - --------------------------------------------------------------------------------
SHARES VALUE ------- ------------ ITALY (CONTINUED) Istituto Mobilaire Italiano Spa........................... 67,000 $ 559,444 Italgas Spa............................................... 95,000 354,790 La Rinascente............................................. 27,000 193,304 La Rinascente Savings (Risp).............................. 29,000 80,400 La Rinascente Warrants "99" (b)........................... 2,800 2,280 Mediobanca Spa............................................ 15,000 95,257 Montedison Spa (b)........................................ 242,000 140,658 SAI-Savings (Risp)........................................ 37,000 143,371 Telecom Italia Spa........................................ 357,000 615,979 Telecom Italia Mobile Spa................................. 357,000 486,728 ------------ 5,444,472 ------------ JAPAN -- 30.27% Amada Co. Ltd. ........................................... 101,000 1,086,602 Asahi Glass Co. Ltd. ..................................... 120,000 1,433,242 Bank of Tokyo-Mitsubishi Ltd. ............................ 90,600 2,106,374 Canon, Inc................................................ 86,000 1,787,723 Canon Sales Co., Inc. .................................... 31,000 862,042 Citizen Watch Co. Ltd. ................................... 92,000 765,818 Dai Nippon Printing Co. Ltd. ............................. 91,000 1,758,913 Daiichi Pharmaceutical Co. Ltd............................ 63,000 970,721 Daikin Industries ltd..................................... 95,000 1,039,374 Daiwa House Industry Co. Ltd.............................. 48,000 743,973 Fanuc..................................................... 40,100 1,594,035 Fujitsu................................................... 57,000 519,687 Hitachi Ltd............................................... 195,000 1,813,434 Honda Motor Co............................................ 43,000 1,113,407 Inax...................................................... 126,000 1,252,172 Isetan.................................................... 32,000 484,312 Ito Yokado Co. Ltd........................................ 46,000 2,772,211 Kaneka Corp............................................... 50,000 335,973 Keio Teito Electric Railway............................... 113,000 669,667 Kinki Nippon Railway...................................... 114,000 820,066 Kirin Brewery Co. Ltd..................................... 108,000 1,319,458 Kokuyo.................................................... 20,000 552,509 Kuraray Co. Ltd........................................... 88,000 986,858 Maeda Road Construction................................... 22,000 379,098 Marui Co. Ltd............................................. 13,000 288,016 Matsushita Electric Industrial Co......................... 158,000 2,938,693 Mitsubishi Paper Mills.................................... 118,000 736,953 NGK Insulators............................................ 161,000 1,805,502 Nintendo Corp. Ltd........................................ 8,500 632,377 Nippon Denso Co. Ltd...................................... 65,000 1,410,449 Nippon Meat Packers, Inc.................................. 61,000 867,604 Nippon Steel Co........................................... 76,000 260,536 Okumura................................................... 68,000 567,899 Orix Corp................................................. 2,000 74,033 Osaka Gas Co.............................................. 408,000 1,491,666 Pioneer Electronic Corp................................... 16,000 380,739 Sankyo Co. Ltd. .......................................... 73,000 1,890,202 Secom..................................................... 23,000 1,518,215 Seino Transportation...................................... 33,000 520,508 Sekisui House Ltd......................................... 192,000 2,188,156 Shinmaywa Industries Ltd. ................................ 87,000 888,391 Sony Corp................................................. 30,600 2,011,517 Sumitomo Bank............................................. 105,000 2,029,515 Sumitomo Electric Industries.............................. 82,000 1,173,763
SHARES VALUE --------- ------------ Takeda Chemical Industries.............................. 71,000 $ 1,255,819 TDK Corp................................................ 18,000 1,073,291 Tokio Marine & Fire Insurance Co........................ 91,000 1,211,327 Tokyo Electric Power.................................... 43,500 1,102,557 Tokyo Steel Mfg......................................... 72,700 1,425,082 Tonen Corp.............................................. 69,000 1,012,843 Toray Industries, Inc................................... 407,000 2,805,325 Toshiba Corp............................................ 233,000 1,656,981 Toyo Suisan Kaisha...................................... 52,000 635,295 Toyota Motor Corp....................................... 30,000 749,443 Yamazaki Baking Co. Ltd. ............................... 48,000 888,391 ------------ 64,658,757 ------------ MALAYSIA -- 2.39% Genting Bhd............................................. 28,000 218,820 Hume Industries (Malaysia) Bhd.......................... 64,000 312,921 Kuala Lumpur Kepong Bhd................................. 141,000 356,004 Land & General Holdings Bhd............................. 125,500 309,324 Malayan Banking Bhd..................................... 59,000 567,490 Malaysia International Shipping Bhd (Frgn.)............. 81,000 251,583 Nestle (Malaysia) Bhd................................... 36,000 289,997 Public Bank Bhd (Frgn.)................................. 144,000 398,204 Resorts World Bhd....................................... 39,000 223,509 Sime Darby Bhd.......................................... 197,000 544,766 Telekom Malaysia Bhd.................................... 87,000 774,046 Tenaga Nasional Bhd..................................... 162,000 681,709 YTL Corp. Bhd........................................... 34,000 177,140 ------------ 5,105,513 ------------ NETHERLANDS -- 6.07% ABN AMRO Holdings NV.................................... 23,087 1,238,953 Akzo Nobel NV........................................... 2,000 239,616 DSM NV.................................................. 4,150 412,107 Hoogovens NV............................................ 5,600 207,347 ING Groep NV............................................ 56,811 1,694,112 KPN NV.................................................. 29,790 1,127,444 Philips Electronics NV.................................. 15,200 494,229 Royal Dutch Petroleum Co................................ 24,830 3,834,547 Royal Dutch Petroleum Co. NY Shares (c)................. 6,200 953,250 Unilever NV............................................. 11,740 1,698,857 Vendex International NV................................. 15,800 550,764 VNU-Ver Ned Uitgevers................................... 33,500 520,095 ------------ 12,971,321 ------------ NEW ZEALAND -- 2.71% Brierley Investments Ltd................................ 1,017,600 962,039 Carter Holt Harvey Ltd.................................. 608,600 1,388,394 Fletcher Challenge Building............................. 151,550 295,895 Fletcher Challenge Energy............................... 151,550 334,309 Fletcher Challenge Forest Ltd........................... 70,445 87,350 Fletcher Challenge Paper................................ 229,100 442,599 Telecom Corp. of New Zealand Ltd........................ 10,500 700,875 Telecom Corp. of New Zealand Ltd. ADS (c)............... 376,200 1,577,272 ------------ 5,788,733 ------------
- -------------------------------------------------------------------------------- 10 NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - --------------------------------------------------------------------------------
SHARES VALUE ------- ------------ SPAIN -- 2.97% Banco Bilbao-Vizcaya S. A.................................. 10,300 $ 416,946 Banco Central Hispanoamericano............................. 9,430 191,967 Banco Intercontinental Espanol S.A......................... 4,420 494,019 Banco Popular Espanol S.A.................................. 2,480 441,797 Banco Santander S.A........................................ 9,500 443,098 Cia Sevillana de Electricidad.............................. 45,900 422,444 Empresa Nacional de Electridad S.A......................... 12,800 797,686 Fomento de Construcciones y Contratas S.A.................. 3,800 314,170 Iberdrola S.A.............................................. 83,600 857,447 Repsol S.A................................................. 1,200 41,697 Repsol S.A. ADR (c)........................................ 15,500 538,625 Telefonica de Espana....................................... 57,900 1,065,775 Vallehermosa S.A........................................... 7,700 151,945 Viscofan Envolturas Celulosicas S.A........................ 11,300 178,475 ------------ 6,356,091 ------------ SWITZERLAND -- 2.41% ABB AG (Bearer)............................................ 210 259,732 Ciba-Geigy AG (Reg.)....................................... 653 795,642 CS Holdings AG (Reg.)...................................... 5,278 501,823 Nestle S.A. (Reg.)......................................... 1,251 1,428,315 Roche Holding AG (Gen.).................................... 99 754,998 Schweiz Bankgesellschaft (Bearer).......................... 560 548,097 Societe Generale de Surveillance S.A. (Bearer)............. 190 454,658 Zurich Versicherungs (Reg.)................................ 1,491 406,225 ------------ 5,149,490 ------------ UNITED KINGDOM -- 16.65% Asda Group PLC............................................. 152,200 275,545 Bass PLC................................................... 91,500 1,150,326 B.A.T. Industries PLC...................................... 124,000 965,408 Booker PLC................................................. 44,500 260,707 British Gas PLC............................................ 400,300 1,113,500 British Petroleum Co. PLC.................................. 218,123 1,913,449 British Steel PLC.......................................... 336,000 858,928 British Telecommunications PLC............................. 377,200 2,028,146 Charter PLC................................................ 49,449 713,111 Coats Viyella PLC.......................................... 229,100 612,357 FKI PLC.................................................... 187,625 495,668 General Electric Co. PLC................................... 447,700 2,414,171 Glaxo Wellcome PLC......................................... 61,500 828,124 Grand Metropolitan PLC..................................... 248,700 1,650,270 Guinness PLC............................................... 197,200 1,434,182 Hanson PLC................................................. 225,500 632,521 Hillsdown Holdings PLC..................................... 182,900 494,555 House of Fraser PLC........................................ 358,800 970,182 Legal and General Group PLC................................ 56,000 582,191 Lloyds Abbey Life PLC...................................... 79,100 628,129 Lloyds TSB Group PLC....................................... 496,185 2,428,878 Marks & Spencer PLC........................................ 116,900 854,723 Mirror Group PLC........................................... 129,600 412,867
SHARES VALUE ------- ------------ National Power PLC........................................ 93,500 $ 755,556 National Westminster Bank PLC............................. 111,500 1,067,350 Ocean Group PLC........................................... 73,800 524,112 Peninsular & Oriental Steam Navigation Co................. 85,700 647,245 Reckitt & Colman PLC...................................... 64,575 678,364 Redland PLC............................................... 45,600 284,158 RJB Mining PLC............................................ 72,000 618,741 Rolls-Royce PLC........................................... 156,500 544,771 Royal Insurance Holdings PLC.............................. 87,300 539,944 RTZ Corp. PLC............................................. 50,800 752,329 Scottish Hydro-Electric PLC............................... 68,800 316,469 Sears PLC................................................. 384,700 591,846 Sedgwick Group PLC........................................ 258,000 553,287 SmithKline Beecham PLC.................................... 70,800 757,510 Tesco PLC................................................. 226,900 1,036,653 Thames Water PLC.......................................... 74,600 657,315 Unilever PLC.............................................. 35,200 700,171 Vodafone Group PLC........................................ 96,500 359,907 W.H. Smith Group PLC...................................... 62,500 461,344 ------------ 35,565,010 ------------ Total Non-U.S. Equities (Cost $181,044,716)...................................... 194,309,737 ------------
FACE AMOUNT VALUE ------------ ------------ Short-Term Investments -- 7.00% COMMERCIAL PAPER -- 7.00% Airtouch Communications, Inc. 5.480%, due 07/01/96................................ $ 1,000,000 $ 1,000,000 5.500%, due 07/01/96................................ 945,000 945,000 Baxter International, Inc. 5.550%, due 07/10/96................................ 2,000,000 1,997,225 Dial Corp. 5.550%, due 07/17/96...................... 1,000,000 997,533 FMC Corp. 5.480%, due 07/08/96....................... 1,200,000 1,198,722 GATX Capital Corp. 5.500%, due 07/09/96................................ 1,750,000 1,747,861 Kerr-McGee Credit Corp. 5.500%, due 07/09/96................................ 1,750,000 1,747,861 The Limited, Inc. 5.650%, due 07/01/96................................ 2,000,000 2,000,000 Lockheed Martin Corp. 5.630%, due 07/01/96................................ 832,000 832,000 Melville Corp. 5.650%, due 07/01/96.................. 2,500,000 2,500,000 ------------ Total Short-Term Investments (Cost $14,966,202).................................. 14,966,202 ------------ Total Investments (Cost $196,010,918) -- 97.96% (a)................... 209,275,939 ------------ Cash and other assets, less liabilities -- 2.04%........................... 4,352,390 ------------ Net Assets -- 100%................................... $213,628,329 ============
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 11 NON-U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $196,010,918; net unrealized appreciation consisted of: Gross unrealized appreciation................................ $18,350,459 Gross unrealized depreciation................................ (5,085,438) ----------- Net unrealized appreciation................................ $13,265,021 ===========
(b) Non-income producing security (c) Denominated in U.S. dollars FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4) The Non-U.S. Equity Fund had the following open forward foreign currency contracts as of June 30, 1996:
SETTLEMENT LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) ---------- -------------- ----------- ---------- FORWARD FOREIGN CURRENCY BUY CONTRACTS British Pound........... 08/20/96 1,700,000 $ 2,639,327 $ 34,417 Italian Lira............ 08/20/96 11,400,000,000 7,388,147 338,472 FORWARD FOREIGN CURRENCY SALE CONTRACTS Australian Dollar....... 08/20/96 4,400,00 3,457,136 (30,328) Belgian Franc........... 08/20/96 145,000,000 4,642,492 163,864 British Pound........... 08/20/96 1,700,000 2,639,327 (40,325) Dutch Guilder........... 08/20/96 19,800,000 11,642,173 449,694 French Franc............ 08/20/96 84,900,000 16,529,282 230,752 German Mark............. 08/20/96 16,600,000 10,938,140 423,315 Japanese Yen............ 08/20/96 2,435,000,000 22,357,865 329,733 Swiss Franc............. 08/20/96 3,600,000 2,888,002 165,951 ---------- Total................. $2,065,545 ========== FUTURES CONTRACTS (NOTE 5) The Non-U.S. Equity Fund had the following open index futures contracts as of June 30, 1996: SETTLEMENT CURRENT UNREALIZED DATE COST VALUE GAIN ---------- -------------- ----------- ---------- INDEX FUTURES BUY CON- TRACTS Topix, 13 contracts..... Sept. 1996 $ 2,007,816 $ 2,027,965 $ 20,149 ==========
The segregated cash pledged to cover margin requirements for the open positions at June 30, 1996 was $528,401. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 12 NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1996 ASSETS: Investments, at value (Cost $196,010,918) (Note 1)............... $209,275,939 Cash............................................................. 675,750 Foreign currency, at value (Cost $1,251,418)..................... 1,234,254 Receivables: Investment securities sold...................................... 132,264 Dividends....................................................... 921,822 Variation margin (Note 5)....................................... 20,149 Fund shares sold................................................ 383,610 Net unrealized appreciation on forward foreign currency con- tracts.......................................................... 2,065,545 Other assets..................................................... 53,522 ------------ TOTAL ASSETS.................................................. 214,762,855 ------------ LIABILITIES: Payables: Investment securities purchased................................. 853,302 Fund shares redeemed............................................ 6,371 Investment advisory fees (Note 2)............................... 105,026 Accrued expenses................................................ 169,827 ------------ TOTAL LIABILITIES............................................. 1,134,526 ------------ NET ASSETS........................................................ $213,628,329 ============ NET ASSETS CONSIST OF: Paid in capital (Note 7)......................................... $189,936,001 Accumulated undistributed net investment income.................. 785,599 Accumulated net realized gain.................................... 7,570,744 Net unrealized appreciation...................................... 15,335,985 ------------ NET ASSETS.................................................... $213,628,329 ============ OFFERING PRICE PER SHARE: Brinson Class: Net asset value, offering price and redemption price per share (Based on net assets of $212,365,969 and 19,010,079 shares is- sued and outstanding) (Note 7)................................. $ 11.17 ============ SwissKey Class: Net asset value, offering price and redemption price per share (Based on net assets of $1,262,360 and 113,519 shares issued and outstanding) (Note 7)...................................... $ 11.12 ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 13 NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1996 INVESTMENT INCOME: Dividends (net of $514,189 for foreign taxes withheld)........... $ 3,856,097 Interest......................................................... 1,167,297 ----------- TOTAL INCOME.................................................. 5,023,394 ----------- EXPENSES: Advisory (Note 2)................................................ 1,403,109 Accounting....................................................... 130,116 Custodian........................................................ 128,212 Administration................................................... 119,433 Distribution (Note 6)............................................ 3,544 Other............................................................ 325,926 ----------- TOTAL EXPENSES................................................ 2,110,340 Expenses waived by Advisor (Note 2)........................... (352,910) ----------- NET EXPENSES.................................................. 1,757,430 ----------- NET INVESTMENT INCOME ........................................ 3,265,964 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain on: Investments..................................................... 5,732,039 Futures contracts............................................... 2,389,926 Foreign currency transactions................................... 14,138,848 ----------- Net realized gain............................................. 22,260,813 ----------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency ............................... 9,461,343 Futures contracts .............................................. 20,149 Forward contracts............................................... 1,441,930 Translation of other assets and liabilities denominated in for- eign currency.................................................. (4,433) ----------- Change in net unrealized appreciation or depreciation......... 10,918,989 ----------- Net realized and unrealized gain.................................. 33,179,802 ----------- Net increase in net assets resulting from operations.............. $36,445,766 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 14 NON-U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
YEAR YEAR ENDED ENDED JUNE 30, 1996 JUNE 30, 1995 ------------- ------------- OPERATIONS: Net investment income............................ $ 3,265,964 $ 2,518,556 Net realized gain (loss)......................... 22,260,813 (5,050,764) Change in net unrealized appreciation or depreci- ation .......................................... 10,918,989 2,039,362 ------------ ------------ Net increase (decrease) in net assets resulting from operations................................. 36,445,766 (492,846) ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class................................... (3,057,609) -- SwissKey Class.................................. (8,629) -- Distributions from net realized gain: Brinson Class................................... (8,632,717) -- SwissKey Class.................................. (14,731) -- ------------ ------------ Total distributions to shareholders............. (11,713,686) -- ------------ ------------ CAPITAL SHARE TRANSACTIONS: Shares sold...................................... 86,752,018 110,628,882 Shares issued on reinvestment of distributions... 10,473,903 -- Shares redeemed.................................. (56,648,208) (33,361,344) ------------ ------------ Net increase in net assets resulting from capital share transactions (Note 7)..................... 40,577,713 77,267,538 ------------ ------------ TOTAL INCREASE IN NET ASSETS................... 65,309,793 76,774,692 ------------ ------------ NET ASSETS: Beginning of year................................ 148,318,536 71,543,844 ------------ ------------ End of year (including accumulated undistributed net investment income of $785,599 and $632,906, respectively)................................... $213,628,329 $148,318,536 ============ ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 15 NON-U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
YEAR YEAR AUGUST 31, 1993* ENDED ENDED THROUGH BRINSON CLASS JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994 - ------------------------------------------------------------------------------- Net asset value, beginning of pe- riod............................. $ 9.68 $ 9.69 $ 10.00 -------- -------- ------- Income from investment opera- tions: Net investment income........... 0.18 0.15 0.10 Net realized and unrealized gain (loss)......................... 2.05 (0.16) (0.34) -------- -------- ------- Total income (loss) from in- vestment operations.......... 2.23 (0.01) (0.24) -------- -------- ------- Less distributions: Distributions from net invest- ment income.................... (0.18) -- (0.07) Distributions from net realized gain........................... (0.56) -- -- -------- -------- ------- Total distributions........... (0.74) -- (0.07) -------- -------- ------- Net asset value, end of period.... $ 11.17 $ 9.68 $ 9.69 ======== ======== ======= Total return (non-annualized)..... 23.64% (0.10%) (2.45%) Ratios/Supplemental data Net assets, end of period (in 000s)........................... $212,366 $148,319 $71,544 Ratio of expenses to average net assets: Before expense reimbursement.... 1.20% 1.23% 1.60%** After expense reimbursement..... 1.00% 1.00% 1.00%** Ratio of net investment income to average net assets: Before expense reimbursement.... 1.67% 1.93% 1.28%** After expense reimbursement..... 1.87% 2.16% 1.88%** Portfolio turnover rate.......... 20% 14% 12% Average commission rate paid per share........................... $ 0.0219 N/A N/A
* Commencement of investment operations ** Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 16 NON-U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout the period presented.
JULY 31, 1995* THROUGH SWISSKEY CLASS JUNE 30, 1996 - -------------------------------------------------------------------------------- Net asset value, beginning of period............................. $ 10.26 ------- Income from investment operations: Net investment income.......................................... 0.12 Net realized and unrealized gain............................... 1.45 ------- Total income from investment operations...................... 1.57 ------- Less distributions: Distributions from net investment income....................... (0.15) Distributions from net realized gain........................... (0.56) ------- Total distributions.......................................... (0.71) ------- Net asset value, end of period................................... $ 11.12 ======= Total return (non-annualized).................................... 15.78% Ratios/Supplemental data Net assets, end of period (in 000s)............................. $ 1,262 Ratio of expenses to average net assets: Before expense reimbursement................................... 2.04%** After expense reimbursement.................................... 1.84%** Ratio of net investment income to average net assets: Before expense reimbursement................................... 0.83%** After expense reimbursement.................................... 1.03%** Portfolio turnover rate......................................... 20% Average commission rate paid per share.......................... $0.0219
* Commencement of SwissKey Class distribution ** Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 17 NON-U.S. EQUITY FUND -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1.SIGNIFICANT ACCOUNTING POLICIES The Brinson Funds (the "Trust") is an open-end, management investment company registered under the Investment Company Act of 1940, as amended, as a series company. The Trust currently offers shares of seven series: Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund and Non-U.S. Equity Fund. The Fund has two classes of shares outstanding, Brinson Class and SwissKey Class. There are an unlimited number of shares of each class with par value of $0.001 authorized. Each share of the Fund represents an identical interest in the investments of the Fund and has the same rights. The following is a summary of significant accounting policies consistently followed by the Non-U.S. Equity Fund (the "Fund") in the preparation of its financial statements. A.INVESTMENT VALUATION: Securities for which market quotations are readily available are valued at the last available sales price on the exchange or market on which they are principally traded, or lacking any sales, at the last available bid price on the exchange or market on which such securities are principally traded. Securities for which market quotations are not readily available, including restricted securities which are subject to limitations on their sale, are valued at fair value as determined in good faith by or under the direction of the Trust's Board of Trustees. Futures contracts are valued at the settlement price established each day on the exchange on which they are traded. Forward contracts are valued daily using quoted forward exchange rates. Short-term obligations with a maturity of 60 days or less are valued at amortized cost, which approximates market value. B.FOREIGN CURRENCY TRANSLATION: Investments and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the mean between the bid and offered quotations of such currencies against the U.S. dollar as of the date of valuation. Purchases and sales of portfolio securities, commitments under forward foreign currency contracts, income receipts and expense accruals are translated at the prevailing exchange rate on the date of each transaction. Realized and unrealized foreign exchange gains or losses on investments are included as a component of net realized and unrealized gain or loss in the statement of operations. C.INVESTMENT TRANSACTIONS: Investment transactions are accounted for on a trade date basis. Gains and losses on securities sold are determined on an identified cost basis. D.INVESTMENT INCOME: Interest income, which includes amortization of premiums and discounts, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities are recorded as the information becomes available. E.FEDERAL INCOME TAXES: It is the policy of the Fund to comply with all requirements of the Internal Revenue Code (the "Code") applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. The Fund has met the requirements of the Code applicable to regulated investment companies for the year ended June 30, 1996, therefore, no federal income tax provision was required. F.DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of the Fund to distribute its net investment income on a semi-annual basis and net capital gains, if any, annually. Distributions to shareholders are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences are primarily due to differing treatments for foreign currency transactions. Differences in dividends per share between the classes are due to distribution expenses. G.INCOME AND EXPENSE ALLOCATION: All income earned and expenses incurred by the Fund will be borne on a pro rata basis by each of the classes, except that the Brinson Class shares will not incur any of the distribution expenses. H.USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. - -------------------------------------------------------------------------------- 18 NON-U.S. EQUITY FUND -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 2.INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES Brinson Partners, Inc. (the "Advisor"), a registered investment advisor, provides the Fund with investment management services. As compensation for these services, the Fund pays the Advisor a monthly fee based on the Fund's average daily net assets. The Advisor has agreed to waive its fees and reimburse the Fund to the extent total annualized expenses exceed a specified percentage of the Fund's average daily net assets. The expense cap is 1.00% and 1.84% of the average daily net assets of the Brinson Class and SwissKey Class, respectively. Investment advisory fees and other transactions with affiliates for the year ended June 30, 1996, were as follows:
ADVISORY ADVISORY FEES FEE FEES WAIVED -------- ---------- -------- Non-U.S. Equity Fund............................... 0.80% $1,403,109 $352,910
Certain officers of the Fund are also officers of the Advisor. All officers serve without direct compensation from the Fund. Trustees' fees paid to unaffiliated trustees were $6,836. 3.INVESTMENT TRANSACTIONS Investment transactions for the year ended June 30, 1996, excluding short-term investments, were as follows:
PROCEEDS PURCHASES FROM SALES ------------ ----------- Non-U.S. Equity Fund................................... $104,448,627 $61,894,241
4.FORWARD FOREIGN CURRENCY CONTRACTS The Fund engages in portfolio hedging with respect to changes in currency exchange rates by entering into forward foreign currency contracts to purchase or sell currencies. Forward foreign currency contracts are also used to achieve currency allocation strategies. A forward foreign currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. Risks associated with such contracts include movement in the value of the foreign currency relative to the U.S. dollar and the ability of the counterparty to perform. The unrealized gain, if any, represents the credit risk to the Fund on a forward foreign currency contract. Fluctuations in the value of forward foreign currency contracts are recorded daily as net unrealized gains or losses. The Fund realizes a gain or loss upon settlement of the contracts. The statement of operations reflects net realized and net unrealized gains and losses on these contracts. The counterparty to all forward foreign currency contracts, at and for the year ended June 30, 1996, was the Fund's custodian. 5.FUTURES CONTRACTS The Fund may purchase or sell exchange-traded futures contracts, which are contracts that obligate the Fund to make or take delivery of a financial instrument or the cash value of a securities index at a specified future date at a specified price. The Fund enters into such contracts to hedge a portion of its portfolio. Risks of entering into futures contracts include the possibility that there may be an illiquid market or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Fund is required to deposit either cash or securities (initial margin). Subsequent payments (variation margin) are made or received by the Fund, generally on a daily basis. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains or losses. The Fund recognizes a realized gain or loss when the contract is closed or expires. The statement of operations reflects net realized and net unrealized gains and losses on these contracts. 6.DISTRIBUTION PLAN The Trust has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940. The Plan governs payments made for the expenses incurred in the promotion and distribution of the SwissKey Class of shares. Annual fees under the Plan, which include a 0.25% service fee, total 0.84% of the average daily net assets of the SwissKey Class. - -------------------------------------------------------------------------------- 19 NON-U.S. EQUITY FUND -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 7. CAPITAL TRANSACTIONS Capital stock transactions were as follows:
YEAR ENDED YEAR ENDED JUNE 30, 1996 JUNE 30, 1995 --------------------- ----------------------- SHARES VALUE SHARES VALUE --------- ----------- ---------- ------------ Sales: Brinson Class.................... 8,044,119 $85,398,213 11,370,317 $110,628,882 SwissKey Class................... 125,829 1,353,805 -- -- --------- ----------- ---------- ------------ Total Sales................... 8,169,948 $86,752,018 11,370,317 $110,628,882 ========= =========== ========== ============ Dividend Reinvestment: Brinson Class.................... 998,992 $10,452,496 -- -- SwissKey Class................... 2,042 21,407 -- -- --------- ----------- ---------- ------------ Total Dividend Reinvestment... 1,001,034 $10,473,903 -- -- ========= =========== ========== ============ Redemptions: Brinson Class.................... 5,347,882 $56,492,091 3,435,839 $ 33,361,344 SwissKey Class................... 14,352 156,117 -- -- --------- ----------- ---------- ------------ Total Redemptions............. 5,362,234 $56,648,208 3,435,839 $ 33,361,344 ========= =========== ========== ============
- -------------------------------------------------------------------------------- 20 REPORT OF INDEPENDENT AUDITORS - -------------------------------------------------------------------------------- The Board of Trustees and Shareholders The Brinson Funds--Non-U.S. Equity Fund We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of The Brinson Funds--Non-U.S. Equity Fund as of June 30, 1996, the related statements of operations for the year then ended and changes in net assets and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of June 30, 1996, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The Brinson Funds--Non-U.S. Equity Fund at June 30, 1996, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for the periods indicated therein, in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP ERNST & YOUNG LLP Chicago, Illinois August 9, 1996 - -------------------------------------------------------------------------------- 21 SPECIAL MEETING OF SHAREHOLDERS - -------------------------------------------------------------------------------- A Special Meeting of Shareholders was held on February 16, 1996. At the meeting, shareholders of the Fund were asked to consider and act upon amendments to the Trust's fundamental investment policies to (1) permit the Fund to invest in affiliated investment companies; (2) permit the Fund to enter into forward foreign currency transactions for non-hedging purposes; and (3) increase the limitation on permissible loans of portfolio securities from 25% to 33 1/3% of its assets. The results of all matters voted on by shareholders of the Fund at the Special Meeting held on February 16, 1996, were as follows: A. AMENDMENT TO THE TRUST'S FUNDAMENTAL INVESTMENT POLICIES TO PERMIT THE FUND TO INVEST IN AFFILIATED INVESTMENT COMPANIES:
For Against Abstain --------- --------- ------- Non- U.S. Equity Fund............................... 9,111,850 144,663 2,020 B. AMENDMENT TO THE TRUST'S FUNDAMENTAL INVESTMENT POLICIES TO PERMIT THE FUND TO ENTER INTO FORWARD FOREIGN CURRENCY TRANSACTIONS FOR NON-HEDGING PURPOSES: For Against Abstain --------- --------- ------- Non- U.S. Equity Fund............................... 7,927,862 1,328,651 2,020 C. AMENDMENT TO THE TRUST'S FUNDAMENTAL INVESTMENT POLICIES TO INCREASE THE LIMITATION ON PERMISSIBLE LOANS OF PORTFOLIO SECURITIES FROM 25% TO 33 1/3% OF ITS ASSETS: For Against Abstain --------- --------- ------- Non- U.S. Equity Fund............................... 8,914,286 291,422 52,825
- -------------------------------------------------------------------------------- 22 DISTRIBUTED BY: FUND/PLAN BROKER SERVICES, INC. 2 W. ELM STREET CONSHOHOCKEN, PA 19428 This report is submitted for the general information of the shareholders of the Fund. It is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective Prospectus which includes details regarding the Fund's objectives, policies, expenses and other information. - -------------------------------------------------------------------------------- LOGO 10 East 50th Street . New York, New York 10022 . Tel: (800) SWISSKEY LOGO SWISSKEY FUNDS SWISSKEY GLOBAL FUND SWISSKEY GLOBAL EQUITY FUND SWISSKEY GLOBAL BOND FUND ANNUAL REPORT JUNE 30, 1996 Your Key to Performance ----------------------------- TRUSTEES AND OFFICERS - -------------------------------------------------------------------------------- LOGO TRUSTEES Walter E. Auch Frank K. Reilly, CFA Edward M. Roob OFFICERS Frank K. Reilly, CFA Carolyn M. Burke, CPA Chairman of the Board Assistant Secretary E. Thomas McFarlan Catherine E. Macrae President and Treasurer Assistant Secretary Thomas J. Digenan, CPA Debra L. Nichols Assistant Treasurer Assistant Secretary Bruce G. Leto Secretary ------------------------------------------------------------ 1 THE FUNDS' ADVISOR -- BRINSON PARTNERS, INC. - -------------------------------------------------------------------------------- LOGO Brinson Partners, Inc. is an institutional investment management firm structured around teams of investment specialists covering major world asset classes. We specialize in managing multiple asset portfolios that provide clients with the opportunity to participate in all major world asset classes. It is important that investment decisions, whether they pertain to a global portfolio or a single asset class portfolio, be made within the context of a global capital market perspective. Our coordinated application of investment strategies distinguishes Brinson Partners, Inc. as a leader in global investment management of institutional assets. We firmly believe that asset allocation is portfolio management at its highest and most important level. Performance is maximized through a comprehensive understanding of global investment markets and their interrelationships. Portfolio structure is tailored to specific client objectives and focused upon both risk and return considerations in the context of full long-term investment cycles. At Brinson Partners, Inc. our investment decisions are based on fundamental research, internally developed valuation systems and seasoned judgment. Our independent team approach allows for rapid responses to market changes, while providing each client with the benefit of our best talent and the flexibility to customize portfolios to meet unique requirements. ------------------------------------------------------------ 2 TABLE OF CONTENTS - -------------------------------------------------------------------------------- LOGO Shareholder Letter............................................................ 4 Global Economic and Market Highlights......................................... 5 Global Fund................................................................... 6 Schedule of Investments.....................................................10 Financial Statements........................................................17 Financial Highlights........................................................20 Global Equity Fund............................................................22 Schedule of Investments.....................................................26 Financial Statements........................................................31 Financial Highlights........................................................34 Global Bond Fund..............................................................36 Schedule of Investments.....................................................39 Financial Statements........................................................42 Financial Highlights........................................................45 The SwissKey Funds--Notes to Financial Statements.............................47 Report of Independent Auditors................................................51 Special Meeting of Shareholders...............................................52 ------------------------------------------------------------ 3 SHAREHOLDER LETTER - -------------------------------------------------------------------------------- LOGO August 19, 1996 Dear Shareholder: We appreciate the confidence you have placed in us and are pleased to present you with the June 30, 1996 Annual Report for the Global Fund, Global Equity Fund and Global Bond Fund. The SwissKey Funds provide you with the opportunity to invest in a diversified family of mutual funds specializing in global investing. One of the many benefits offered by these funds is management by Brinson Partners, Inc., the worldwide portfolio manager of Swiss Bank Corporation and leader in the trend toward global and non-U.S. portfolio management. Another benefit is the fact that you do not incur a sales charge upon purchasing or redeeming shares so your full investment works for you. We also offer toll-free access to investment information and free transfer of investments between funds. This Report presents our current global economic and market outlook, as well as the Funds' recent investment strategies and performance. To summarize this information: Global Fund For the period from July 31, 1995 to June 30, 1996, the Fund provided an unannualized total return of 13.24%. The Fund returned 4.27% in the first half of 1996. The strategy of underweighting the overpriced equity markets in favor of the attractive bond markets remains in place. A portion of foreign currency exposure is hedged into U.S. dollars. Global Equity Fund For the period from July 31, 1995 to June 30, 1996, the Fund provided an unannualized total return of 19.25%. The Fund returned 8.47% in the first half of 1996. Reflecting only modestly attractive equity markets, the Fund maintains its 15% cash hedge. Primary underweights include the U.S. market, in light of its overvaluation and increasing volatility. A portion of foreign currency exposure is hedged into U.S. dollars. Global Bond Fund For the period from July 31, 1995 to June 30, 1996, the Fund provided an unannualized total return of 9.17%. The Fund returned 1.82% in the first half of 1996. Bond markets are generally attractive, with the exception of the Japanese market which continues to be the largest underweight. A portion of foreign currency exposure is hedged into U.S. dollars. We look forward to the challenges ahead and, as always, welcome your comments and suggestions. Sincerely, /s/ Raoul Weil /s/ Raymond Simon Raoul Weil Raymond Simon Managing Director Executive Director Private Investors & Private Investors & Asset Management Asset Management ------------------------------------------------------------ 4 GLOBAL ECONOMIC AND MARKET HIGHLIGHTS - -------------------------------------------------------------------------------- LOGO Since the yen's peak in 1995, the Japanese economy has begun showing signs of recovery. Real GDP growth has recently turned up and output prices appear to have stopped falling. However, structural problems persist, as unemployment hit an all-time high in May. With continued slow economic growth through much of continental Europe, unemployment remains high. While the overpriced currencies of the deutschemark bloc are a contributing factor, structural rigidity and accompanying high labor costs exacerbate the problems. The U.S. continues to be a leader among developed countries in productivity improvements and the restraint of labor costs. Price pressures in most countries remain subdued, due to continuing central bank responsibility. The last 15 years have seen a powerful trend toward a reduction and convergence in inflation rates across countries. Nevertheless, bond markets have yet to fully accept a lower-inflation world. Any indication of potential price pressures, such as the recent strong employment reports in the U.S., adversely affects bond prices. GLOBAL ENVIRONMENT
6 months 1 year MAJOR MARKETS ended ended Total Return in U.S. Dollars 6/30/96 6/30/96 - ------------------------------------------------------- U.S. Equity 10.27% 26.22% Non-U.S. Equities (currency unhedged) 4.82 13.61 Non-U.S. Equities (currency hedged) 9.96 30.97 U.S. Bonds -1.25 4.99 Non-U.S. Bonds (currency unhedged) -1.28 -1.68 Non-U.S. Bonds (currency hedged) 3.55 11.52 U.S. Cash Equivalents 2.53 5.35 - ------------------------------------------------------- MAJOR CURRENCIES 6 months 1 year Percent Change Relative to U.S. ended ended Dollars 6/30/96 6/30/96 - ------------------------------------------------------- Yen -5.95% -22.60% Pound 0.08 -2.33 Deutschemark -5.97 -9.07 Canadian Dollar -0.13 0.60 - -------------------------------------------------------
------------------------------------------------------------ 5 GLOBAL FUND - -------------------------------------------------------------------------------- LOGO The Global Fund is an actively managed, diversified mutual fund that provides integrated asset management across and within securities markets. The investment process is strategic in nature and is driven by deviations of market price from fundamental value. We believe this philosophy offers the greatest potential for achieving enhanced long-term returns, while controlling risk. The SwissKey Global Fund has provided an unannualized return of 13.24% since its inception on July 31, 1995. This compares with the corresponding 12.57% return of its benchmark, the GSMI Mutual Fund Index. For the first half of 1996, the SwissKey Global Fund returned 4.27% compared to the 5.55% return of the benchmark. Substantial positive contributions to performance came from equity security selection and from the strategy of hedging risks in the overpriced yen, deutschemark, and DM-related currencies. Because many equity markets provided double-digit returns in dollar-hedged terms, the primary negative contributor to performance was the above-normal allocation to bond markets with corresponding underweights in equities. Market strategy within the Global Fund centers on reducing the risk of exposure to the overpriced equity markets; the relatively attractive bond markets are the primary overweights. Strategy for emerging markets investments mirrors that of the developed markets, with a small underweight in equities and a small overweight in bonds. A small underweight is also carried in the U.S. high yield bond market. Currency strategy continues to focus on controlling the risk of exposure to the overpriced yen and DM-related currencies. Strategy primarily favors the attractively priced U.S. dollar. ------------------------------------------------------------ 6 GLOBAL FUND - -------------------------------------------------------------------------------- LOGO TOTAL RETURN
6 months ended Since 6/30/96 inception* - --------------------------------------------- SWISSKEY GLOBAL FUND 4.27% 13.24% GSMI Mutual Fund Index** 5.55 12.57 - ---------------------------------------------
*Inception date of the SwissKey Global Fund is July 31, 1995. **An un-managed index compiled by the Advisor, constructed as follows: 40% Wilshire 5000 Index; 22% MSCI Non-U.S. Equity (Free) Index; 19% Salomon BIG Bond Index; 2% International Dollar Bond Index; 9% Salomon Non-U.S. Government Bond Index (unhedged); 2% JP Morgan EMBI+; 3% IFC Investable Index; and 3% High Yield Bond Index. Total return includes reinvestment of all capital gain and income distributions. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $10,000 This chart shows the growth in the value of an investment in the SwissKey Global Fund and the GSMI Mutual Fund Index if you had invested $10,000 on July 31, 1995, and had reinvested all your income dividends and capital gain distributions through June 30, 1996. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. SWISSKEY GLOBAL FUND VS. GSMI MUTUAL FUND INDEX Wealth Value with Dividends Reinvested [CHART APPEARS HERE] 7/31/95 6/30/96 ------- ------- SwissKey Global Fund $10,000 $11,324 GSMI Mutual Fund Index $10,000 $11,257 Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. ------------------------------------------------------------- 7 GLOBAL FUND - -------------------------------------------------------------------------------- LOGO ASSET ALLOCATION As of June 30, 1996
Current Benchmark Strategy - ----------------------------------------------------------------------------------------------- U.S. EQUITY 40.0% 25.0% Large Cap. Stocks 28.0 18.0 Small/Int. Cap. 12.0 7.0 NON-U.S. EQUITIES 22.0 17.0 Japan Equities 8.4 5.4 Other Equities 13.6 11.6 EMERGING MARKETS EQUITIES 3.0 2.0 DOLLAR BONDS 21.0 24.5 U.S. Bonds 19.0 22.5 International $ Bonds 2.0 2.0 HIGH YIELD BONDS 3.0 2.5 NON-U.S. BONDS 9.0 25.0 Japan Bonds 2.6 0.0 Other Bonds 6.4 25.0 EMERGING MARKETS DEBT 2.0 3.0 CASH EQUIVALENTS 0.0 1.0 - ----------------------------------------------------------------------------------------------- 100.0% 100.0%
TOP TEN U.S. EQUITY HOLDINGS As of June 30, 1996
Percent of Net Assets - ------------------------------------------------------------------------------ 1. Citicorp 1.39% 2. Lockheed Martin Corp. 1.35 3. Chase Manhattan Corp. 1.16 4. Burlington Northern Santa Fe 1.05 5. Enron Corp. 1.02 6. Avon Products, Inc. 0.92 7. Schering Plough Corp. 0.84 8. Kimberly-Clark Corp. 0.80 9. Mattel, Inc. 0.76 10. Aon Corp. 0.72 - ------------------------------------------------------------------------------
CURRENCY ALLOCATION As of June 30, 1996
Current Benchmark Strategy - -------------------------------------- U.S. 66.0% 85.9% Japan 11.0 0.0 U.K. 4.1 4.1 Continental Europe 12.2 5.0 Canada 1.2 1.2 Emerging Markets 3.0 2.0 Other 2.5 1.8 - -------------------------------------- 100.0% 100.0%
TOP TEN NON-U.S. EQUITY HOLDINGS As of June 30, 1996
Percent of Net Assets - ------------------------------------------------------------------------------ 1. Matsushita Electric Industrial Co. 0.22% 2. Royal Dutch Petroleum Co. 0.21 3. Toray Industries, Inc. 0.21 4. Ito Yokado Co. Ltd. 0.20 5. General Electric Co. PLC 0.20 6. Royal Dutch Petroleum Co. NY Shares 0.20 7. Lloyds TSB Group PLC 0.20 8. British Telecommunications PLC 0.18 9. Broken Hill Proprietary Co. Ltd. 0.18 10. British Petroleum Co. PLC 0.18 - ------------------------------------------------------------------------------
------------------------------------------------------------ 8 GLOBAL FUND - -------------------------------------------------------------------------------- LOGO INDUSTRY DIVERSIFICATION As a Percent of Net Assets As of June 30, 1996 - -------------------------------------------------------------------------------- U.S. EQUITIES Basic Industries Chemicals............................................................... 0.22% Housing/Paper........................................................... 0.99 Metals.................................................................. 0.10 ----- 1.31 Capital Investment Capital Goods........................................................... 2.48 Technology.............................................................. 1.12 ----- 3.60 Consumer Autos/Durables.......................................................... 0.28 Discretionary........................................................... 1.97 Health: Drugs........................................................... 2.03 Health: Non-Drugs....................................................... 1.03 Non-Durables............................................................ 2.92 Retail/Apparel.......................................................... 1.20 ----- 9.43 Energy................................................................... 1.43 Financial Banks................................................................... 3.04 Non-Banks............................................................... 2.74 ----- 5.78 Post Venture............................................................. 1.21 Services................................................................. 1.78 Transportation........................................................... 1.34 Utilities................................................................ 1.09 Miscellaneous............................................................ 0.75 ----- Total U.S. Equities................................................... 27.72* ----- NON-U.S. EQUITIES Aerospace & Military..................................................... 0.03 Airlines................................................................. 0.02 Appliances & Household Durables.......................................... 0.43 Automobiles.............................................................. 0.50 Banking.................................................................. 1.97 Beverages & Tobacco...................................................... 0.45 Broadcasting & Publishing................................................ 0.22 Building Materials....................................................... 0.21 Business & Public Service................................................ 0.58 Chemicals................................................................ 0.69 Construction............................................................. 0.37 Data Processing.......................................................... 0.17 Electric Components...................................................... 0.20 Electronics.............................................................. 0.70 Energy................................................................... 1.44 Financial Services....................................................... 0.20 - --------------------------------------------------------------------------------
Food & House Products................................................... 0.77% Forest Products......................................................... 0.30 Gold Mining............................................................. 0.03 Health & Personal Care.................................................. 0.55 Industrial Components................................................... 0.38 Insurance............................................................... 0.69 Leisure & Tourism....................................................... 0.21 Machinery & Engineering................................................. 0.28 Merchandising........................................................... 0.78 Metals.................................................................. 0.15 Miscellaneous Materials................................................. 0.24 Multi-Industry.......................................................... 0.62 Non-Ferrous Metals...................................................... 0.36 Real Estate............................................................. 0.08 Recreation.............................................................. 0.11 Shipping................................................................ 0.11 Steel................................................................... 0.12 Telecommunications...................................................... 0.78 Textiles and Apparel.................................................... 0.06 Transportation.......................................................... 0.15 Utilities............................................................... 0.90 ------ Total Non-U.S. Equities.............................................. 15.85* ------ EMERGING MARKETS EQUITIES............................................... 2.13 ------ U.S. BONDS Corporate Bonds Asset-Backed........................................................... 0.93 CMO.................................................................... 0.21 Consumer............................................................... 0.44 Financial.............................................................. 0.75 Telecommunications..................................................... 0.39 Transportation......................................................... 0.25 ------ 2.97 U.S. Government Agencies................................................ 6.02 U.S. Government Obligations............................................. 9.06 International Dollar Bonds.............................................. 2.09 ------ Total U.S. Bonds..................................................... 20.14* ------ HIGH YIELD BONDS........................................................ 2.55 ------ NON-U.S. BONDS Foreign Government Bonds................................................ 23.72 ------ EMERGING MARKETS DEBT................................................... 3.23 ------ SHORT-TERM INVESTMENTS.................................................. 4.14* ------ TOTAL INVESTMENTS.................................................... 99.48 CASH AND OTHER ASSETS, LESS LIABILITIES................................. 0.52 ------ NET ASSETS........................................................... 100.00% ======
* The Fund held a long position in Topix futures on June 30, 1996 which increased Japanese equity exposure from 4.78% to 5.31%. The Fund held a long position in U.S. Treasury futures which increased U.S. bond exposure from 20.14% to 23.52%. The Fund also held a short position in stock index futures which reduced U.S. equity exposure from 27.72% to 24.78%. These three adjustments result in a net decrease in the Fund's exposure to Short-Term Investments from 4.14% to 3.17%. ------------------------------------------------------------ 9 GLOBAL FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - --------------------------------------------------------------------------------
SHARES VALUE ------ ----- Equities -- 45.70% U.S. EQUITIES -- 27.72% Aetna Life & Casualty Co............................. 32,900 $ 2,352,350 Allergan, Inc........................................ 54,900 2,154,825 Allstate Corp........................................ 31,200 1,423,500 Alza Corp. (b)....................................... 53,500 1,464,563 American Mobile Satellite Corp., Inc. (b)............ 5,900 91,450 Aon Corp............................................. 66,800 3,390,100 Automatic Data Processing, Inc....................... 62,700 2,421,787 Avon Products, Inc................................... 96,200 4,341,025 Bard (C.R.), Inc..................................... 33,100 1,125,400 Beckman Instruments, Inc............................. 21,400 813,200 Biogen, Inc. (b)..................................... 5,000 274,375 Birmingham Steel Corp................................ 21,500 352,063 Boeing Co............................................ 14,200 1,237,175 Boston Technology, Inc. (b).......................... 21,400 361,125 Brinker International, Inc. (b)...................... 15,500 232,500 Brinson Post Venture Fund............................ 423,765 5,722,985 Burlington Northern Santa Fe......................... 61,200 4,949,550 Centerior Energy Co.................................. 45,000 331,875 Chase Manhattan Corp................................. 77,300 5,459,313 CIGNA Corp........................................... 26,500 3,123,687 Citicorp............................................. 79,200 6,543,900 CMS Energy Corp...................................... 58,500 1,806,188 Coca-Cola Enterprises, Inc........................... 51,300 1,776,262 Comerica, Inc........................................ 14,700 655,988 Comverse Technology, Inc. (b)........................ 16,400 500,200 Cooper Cameron Corp. (b)............................. 8,083 353,631 Corning, Inc......................................... 83,600 3,208,150 Dial Corp............................................ 43,800 1,253,775 EMC Corp. /Mass (b).................................. 60,900 1,134,263 Enron Corp........................................... 118,100 4,827,337 Entergy Corp......................................... 16,300 462,513 Federal Express Corp. (b)............................ 6,100 500,200 Federated Department Stores (b)...................... 56,900 1,941,712 FileNet Corp. (b).................................... 8,300 302,950 First Data Corp...................................... 15,989 1,273,124 Food Lion, Inc. Class A.............................. 76,000 603,250 Ford Motor Co........................................ 54,000 1,748,250 Forest Laboratories, Inc. (b)........................ 36,300 1,402,087 Gannett Co., Inc..................................... 35,700 2,525,775 General Instrument Corp. (b)......................... 85,400 2,465,925 Genzyme Corp. (b).................................... 7,000 351,750 Goodyear Tire & Rubber Co............................ 64,200 3,097,650 Health Care and Retirement Corp. (b)................. 28,800 684,000 Honeywell, Inc....................................... 43,200 2,354,400 Inland Steel Industries, Inc......................... 15,100 296,338 Interpublic Group of Companies, Inc.................. 26,600 1,246,875 James River Corp. of Virginia........................ 30,800 812,350 Kimberly-Clark Corp.................................. 48,900 3,777,525 Kroger Co. (b)....................................... 22,500 888,750 Lockheed Martin Corp................................. 75,800 6,367,200 Lyondell Petrochemical Co............................ 58,500 1,411,313 Magna Group, Inc..................................... 9,300 223,200 Manor Care, Inc...................................... 34,950 1,376,156 Mattel, Inc.......................................... 124,675 3,568,822 Melville Corp........................................ 72,700 2,944,350 Nabisco Holdings Corp. Class A....................... 7,200 254,700 National Semiconductor Corp. (b)..................... 62,400 967,200 Nextel Communications, Inc. Class A (b).............. 53,900 1,027,469 Old Republic International Corp...................... 31,050 671,456 Owens Illinois, Inc. (b)............................. 47,800 764,800 Pentair, Inc......................................... 25,200 756,000 Pfizer, Inc.......................................... 3,500 249,813 Philip Morris Companies, Inc......................... 11,400 1,185,600 RJR Nabisco Convertible Preferred "C"................ 174,200 1,132,300 RJR Nabisco Holdings Corp............................ 17,340 537,540 Schering Plough Corp................................. 63,100 3,959,525 Seagate Technology, Inc. (b)......................... 16,600 747,000 Sprint Corp.......................................... 41,700 1,751,400 State Street Boston Corp............................. 12,700 647,700 Timken Co............................................ 14,900 577,375 Transamerica Corp.................................... 14,900 1,218,075 Tyson Foods, Inc. Class A............................ 47,400 1,297,575 Ultramar Corp........................................ 23,400 678,600 US Bancorp........................................... 36,500 1,318,562 USF&G Corp........................................... 48,500 794,187 Westvaco Corp........................................ 12,750 380,906 Whitman Corp......................................... 22,500 542,812 WMX Technologies, Inc................................ 68,000 2,227,000 York International Corp.............................. 7,500 388,125 360 Communications Co. (b)........................... 18,566 445,584 ------------ Total U.S. Equities.................................. 130,830,311 ------------ NON-U.S. EQUITIES -- 15.85% AUSTRALIA -- 0.76% Amcor Ltd............................................ 29,400 200,165 ANZ Banking Group Ltd................................ 33,753 159,932 Boral Ltd............................................ 46,100 119,740 Broken Hill Proprietary Co. Ltd...................... 61,780 854,368 CRA Ltd.............................................. 20,645 317,840 David Jones Ltd...................................... 115,100 159,446 Lend Lease Corp. Ltd................................. 18,056 277,129 M.I.M. Holdings Ltd.................................. 97,900 126,373 National Australia Bank Ltd.......................... 33,947 313,953 News Corp. Ltd....................................... 36,100 204,865 Pacific Dunlop Ltd................................... 47,600 107,151 Qantas Airways Ltd................................... 66,350 112,281 Santos Ltd........................................... 57,800 200,173 WMC Ltd.............................................. 19,100 136,804 Westpac Bank Corp. Ltd............................... 70,138 310,804 ------------ 3,601,024 ------------ BELGIUM -- 0.50% Delhaize-Le Lion S.A................................. 3,500 174,838 Electrabel S.A....................................... 1,960 418,540 Fortis AG............................................ 1,757 230,499 Groupe Bruxelles Lambert S.A......................... 1,150 143,893 Kredietbank NV....................................... 1,120 334,975 Petrofina S.A........................................ 1,055 330,688 Societe Generale de Belgique......................... 1,553 117,731 Solvay S.A. Class A.................................. 390 239,324
- -------------------------------------------------------------------------------- 10 GLOBAL FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - --------------------------------------------------------------------------------
SHARES VALUE ------ ----- BELGIUM (CONTINUED) Tractebel............................................ 505 $ 206,730 Union Miniere Group S.A. (b)......................... 2,320 177,727 ------------ 2,374,945 ------------ CANADA -- 0.59% Alcan Aluminium Ltd.................................. 7,600 231,239 Bank of Montreal..................................... 13,600 332,630 Barrick Gold Corp.................................... 4,400 119,376 Canadian Pacific Ltd................................. 16,900 370,028 Imperial Oil Ltd..................................... 5,900 248,858 Moore Corp. Ltd...................................... 3,900 72,968 Noranda, Inc......................................... 6,300 128,943 Norcen Energy Resources Ltd.......................... 5,800 101,721 Northern Telecom Ltd................................. 3,400 184,864 NOVA Corp............................................ 10,400 94,054 Royal Bank of Canada................................. 9,900 237,423 Seagram Co. Ltd...................................... 6,500 217,761 Thomson Corp......................................... 17,800 281,547 TransCanada Pipelines Ltd............................ 9,700 143,838 ------------ 2,765,250 ------------ FINLAND -- 0.12% Merita Ltd. Class A (b).............................. 22,200 46,350 Outokupu OY Class A.................................. 3,400 57,083 Oy Nokia Ab Class A.................................. 8,700 320,218 UPM-Kymmene Corp. (b)................................ 7,300 151,000 ------------ 574,651 ------------ FRANCE -- 1.57% Accor S.A............................................ 1,940 271,329 Alcatel Alsthom...................................... 2,738 238,804 Banque Nationale de Paris............................ 11,430 401,204 CEP Communications................................... 1,984 167,646 CEP Communications Warrants "97" (b)................. 1,984 5,781 Cie Bancaire S.A..................................... 2,311 260,369 Cie de Saint Gobain.................................. 3,174 424,803 Cie de Suez.......................................... 4,467 163,391 Cie Generale des Eaux................................ 5,026 561,373 Colas................................................ 854 152,950 Credit Local de France............................... 4,859 395,478 Elf Aquitaine S.A.................................... 4,934 362,862 GAN (b).............................................. 1,820 48,788 LVMH................................................. 2,879 682,840 Michelin Class B..................................... 5,960 291,285 Pechiney S.A. Class A................................ 5,604 226,315 Peugeot S.A.......................................... 5,120 685,252 Rhone-Poulenc Class A................................ 11,000 289,103 SEITA................................................ 3,700 169,619 Societe Generale..................................... 4,986 548,189 Total S.A. Class B................................... 8,212 609,041 UAP.................................................. 9,066 184,032 Usinor Sacilor....................................... 17,500 252,404 ------------ 7,392,858 ------------ GERMANY -- 1.03% Allianz AG Holding................................... 288 500,656 BASF AG.............................................. 711 202,496 Bayer AG............................................. 9,780 344,077 Bayerische Motoren Werke AG.......................... 430 248,321 Bayerische Vereinsbank AG............................ 5,794 162,160 Commerzbank AG....................................... 741 153,253 Daimler-Benz AG (b).................................. 438 234,956 Daimler-Benz AG Rights (b)........................... 438 60 Deutsche Bank AG..................................... 11,811 559,473 Hoechst AG........................................... 4,740 160,066 Kaufhof Holding AG................................... 600 226,858 M.A.N. AG............................................ 400 100,256 Mannesmann AG........................................ 1,127 387,982 Muenchener Rueckver AG............................... 171 349,392 Muenchener Rueckver AG Warrants "98" (b)............. 2 248 Preussag AG.......................................... 842 212,146 RWE AG............................................... 5,450 211,970 Schering AG.......................................... 2,085 151,160 Siemens AG........................................... 2,600 139,352 Thyssen AG........................................... 1,250 228,714 Veba AG.............................................. 5,839 310,344 ------------ 4,883,940 ------------ ITALY -- 0.49% Assicurazioni Generali............................... 11,800 272,109 Danieli & Co. Savings (Risp)......................... 26,000 92,436 Edison Spa........................................... 24,000 144,819 ENI ADR (c).......................................... 8,000 400,000 Fiat Spa-Priv........................................ 85,000 149,157 INA-Istituto Nazionale de Assicurazioni.............. 47,000 70,058 Istituto Mobilaire Italiano Spa...................... 30,000 250,497 Italgas Spa.......................................... 33,000 123,243 La Rinascente........................................ 19,000 136,028 La Rinascente Savings (Risp)......................... 9,000 24,952 La Rinascente Warrants "99" (b)...................... 1,400 1,140 Mediobanca Spa....................................... 6,000 38,103 Montedison Spa (b)................................... 105,000 61,029 SAI-Savings (Risp)................................... 16,500 63,935 Telecom Italia Spa................................... 141,000 243,286 Telecom Italia Mobile Spa............................ 167,000 227,685 ------------ 2,298,477 ------------ JAPAN -- 4.78% Amada Co. Ltd........................................ 35,000 376,545 Asahi Glass Co. Ltd.................................. 42,000 501,635 Bank of Tokyo-Mitsubishi Ltd......................... 31,800 737,956 Canon, Inc........................................... 30,000 623,624 Canon Sales Co., Inc................................. 11,000 305,886 Citizen Watch Co. Ltd................................ 32,000 266,372 Dai Nippon Printing Co. Ltd.......................... 32,000 618,519 Daiichi Pharmaceutical Co. Ltd....................... 23,000 354,390 Daikin Industries Ltd................................ 34,000 371,987 Daiwa House Industry Co. Ltd......................... 17,000 263,490
- -------------------------------------------------------------------------------- 11 GLOBAL FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - --------------------------------------------------------------------------------
SHARES VALUE ------ ----- JAPAN (CONTINUED) Fanuc................................................ 13,900 $ 552,546 Fujitsu.............................................. 21,000 191,464 Hitachi Ltd.......................................... 68,000 632,377 Honda Motor Co....................................... 16,000 414,291 Inax................................................. 44,000 437,266 Isetan............................................... 12,000 181,617 Ito Yokado Co. Ltd................................... 16,000 964,247 Kaneka Corp.......................................... 17,000 114,231 Keio Teito Electric Railway.......................... 39,000 231,124 Kinki Nippon Railway................................. 39,000 280,549 Kirin Brewery Co. Ltd................................ 37,000 452,037 Kokuyo............................................... 7,000 193,378 Kuraray Co. Ltd...................................... 30,000 336,429 Maeda Road Construction.............................. 8,000 137,854 Marui Co. Ltd........................................ 5,000 110,775 Matsushita Electric Industrial Co.................... 55,000 1,022,963 Mitsubishi Paper Mills............................... 43,000 268,551 NGK Insulators....................................... 56,000 628,001 Nintendo Corp. Ltd................................... 2,900 215,752 Nippon Denso Co. Ltd................................. 23,000 499,082 Nippon Meat Packers, Inc............................. 22,000 312,906 Nippon Steel Co...................................... 28,000 95,987 Okumura.............................................. 24,000 200,435 Osaka Gas Co......................................... 141,000 515,502 Pioneer Electronic Corp.............................. 5,000 118,981 Sankyo Co. Ltd....................................... 25,000 647,329 Secom................................................ 8,000 528,075 Seino Transportation................................. 12,000 189,275 Sekisui House Ltd.................................... 66,000 752,179 Shinmaywa Industries Ltd............................. 31,000 316,553 Sony Corp............................................ 10,200 670,506 Sumitomo Bank........................................ 36,000 695,834 Sumitomo Electric Industries......................... 28,000 400,797 Takeda Chemical Industries........................... 26,000 459,877 TDK Corp............................................. 6,000 357,763 Tokio Marine & Fire Insurance Co..................... 31,000 412,650 Tokyo Electric Power................................. 14,900 377,657 Tokyo Steel Mfg...................................... 25,000 490,056 Tonen Corp........................................... 25,000 366,972 Toray Industries, Inc................................ 141,000 971,869 Toshiba Corp......................................... 81,000 576,032 Toyo Suisan Kaisha................................... 19,000 232,127 Toyota Motor Corp.................................... 11,000 274,796 Yamazaki Baking Co. Ltd.............................. 17,000 314,639 ------------ 22,563,735 ------------ MALAYSIA -- 0.46% Genting Bhd.......................................... 12,000 93,780 Hume Industries (Malaysia) Bhd....................... 27,000 132,013 Kuala Lumpur Kepong Bhd.............................. 39,500 99,732 Land & General Holdings Bhd.......................... 51,000 125,701 Malayan Banking Bhd.................................. 26,000 250,080 Malaysia International Shipping Bhd (Frgn.).......... 34,000 105,603 Nestle (Malaysia) Bhd................................ 15,000 120,832 Public Bank Bhd (Frgn.).............................. 78,000 215,694 Resorts World Bhd.................................... 13,000 74,503 Sime Darby Bhd....................................... 86,000 237,817 Telekom Malaysia Bhd................................. 38,000 338,089 Tenaga Nasional Bhd.................................. 70,000 294,566 YTL Corp. Bhd........................................ 14,000 72,940 ------------ 2,161,350 ------------ NETHERLANDS -- 1.12% ABN AMRO Holdings NV................................. 9,314 499,831 Akzo Nobel NV........................................ 1,100 131,789 DSM NV............................................... 1,910 189,668 Hoogovens NV......................................... 2,900 107,376 ING Groep NV......................................... 21,985 647,752 KPN NV............................................... 11,855 448,764 Philips Electronics NV............................... 6,480 210,698 Royal Dutch Petroleum Co............................. 6,400 988,365 Royal Dutch Petroleum Co. NY Shares (c).............. 6,100 937,875 Unilever NV.......................................... 4,750 687,357 Vendex International NV.............................. 6,300 219,609 VNU-Ver Ned Uitgevers................................ 14,700 228,221 ------------ 5,297,305 ------------ NEW ZEALAND -- 0.51% Brierley Investments Ltd............................. 385,200 364,168 Carter Holt Harvey Ltd............................... 245,400 559,829 Fletcher Challenge Building.......................... 60,525 118,172 Fletcher Challenge Energy............................ 60,525 133,514 Fletcher Challenge Forest Ltd........................ 16,333 20,253 Fletcher Challenge Paper............................. 121,050 233,857 Telecom Corp. of New Zealand Ltd..................... 198,000 830,143 Telecom Corp. of New Zealand Ltd. ADS (c)............ 2,000 133,500 ------------ 2,393,436 ------------ SPAIN -- 0.56% Banco Bilbao Vizcaya S.A............................. 3,800 153,825 Banco Central Hispanoamericano....................... 5,010 101,989 Banco Intercontinental Espanol S.A................... 1,630 182,183 Banco Popular Espanol S.A............................ 1,190 211,991 Banco Santander S.A.................................. 3,800 177,239 Cia Sevillana de Electricidad........................ 17,200 158,302 Empresa Nacional de Electridad S.A................... 4,800 299,132 Fomento de Construcciones y Contratas S.A............ 1,450 119,881 Iberdrola S.A........................................ 34,900 357,953 Repsol S.A........................................... 4,100 142,465 Repsol S.A. ADR (c).................................. 4,100 142,475 Telefonica de Espana................................. 24,200 445,454 Vallehermosa S.A..................................... 4,000 78,932 Viscofan Envolturas Celulosicas S.A.................. 4,900 77,392 ------------ 2,649,213 ------------ SWITZERLAND -- 0.41% ABB AG (Bearer)...................................... 80 98,945 Ciba-Geigy AG (Reg.)................................. 258 314,358 CS Holdings AG (Reg.)................................ 1,973 187,589 Nestle S.A. (Reg.)................................... 463 528,625 Roche Holding AG (Gen.).............................. 36 274,545
- -------------------------------------------------------------------------------- 12 GLOBAL FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - --------------------------------------------------------------------------------
SHARES VALUE ------ ----- SWITZERLAND (CONTINUED) Schweiz Bankgesellschaft (Bearer)................... 206 $ 201,622 Societe Generale de Surveillance Holding S.A. (Bear- er)................................................ 71 169,898 Zurich Versicherungs (Reg.)......................... 569 155,025 ------------ 1,930,607 ------------ UNITED KINGDOM -- 2.95% Asda Group PLC...................................... 60,200 108,987 Bass PLC............................................ 39,800 500,360 B.A.T. Industries PLC............................... 46,184 359,568 Booker PLC.......................................... 14,100 82,606 British Gas PLC..................................... 167,900 467,041 British Petroleum Co. PLC........................... 96,508 846,601 British Steel PLC................................... 56,000 143,155 British Telecommunications PLC...................... 159,500 857,607 Charter PLC......................................... 19,035 274,506 Coats Viyella PLC................................... 103,300 276,109 FKI PLC............................................. 68,700 181,492 General Electric Co. PLC............................ 174,700 942,050 Glaxo Wellcome PLC.................................. 22,000 296,239 Grand Metropolitan PLC.............................. 95,200 631,708 Guinness PLC........................................ 74,900 544,727 Hanson PLC.......................................... 92,900 260,582 Hillsdown Holdings PLC.............................. 72,200 195,226 House of Fraser PLC................................. 128,800 348,270 Legal & General Group PLC........................... 22,300 231,837 Lloyds Abbey Life PLC............................... 31,300 248,552 Lloyds TSB Group PLC................................ 189,779 928,988 Marks & Spencer PLC................................. 47,000 343,644 Mirror Group PLC.................................... 40,800 129,977 National Power PLC.................................. 37,900 306,263 National Westminster Bank PLC....................... 40,800 390,564 Ocean Group PLC..................................... 28,200 200,270 Peninsular & Oriental Steam Navigation Co........... 32,600 246,210 Reckitt & Colman PLC................................ 28,325 297,555 Redland PLC......................................... 23,200 144,572 RJB Mining PLC...................................... 28,300 243,200 Rolls-Royce PLC..................................... 38,900 135,409 Royal Insurance Holdings PLC........................ 27,366 169,257 RTZ Corp. PLC....................................... 20,100 297,674 Scottish Hydro-Electric PLC......................... 30,900 142,135 Sears PLC........................................... 160,700 247,231 Sedgwick Group PLC.................................. 92,400 198,154 SmithKline Beecham PLC.............................. 33,400 357,357 Tesco PLC........................................... 87,800 401,137 Thames Water PLC.................................... 33,000 290,769 Unilever PLC........................................ 13,400 266,542 Vodafone Group PLC.................................. 45,600 170,070 W.H. Smith Group PLC................................ 29,300 216,278 ------------ 13,920,479 ------------ Total Non-U.S. Equities............................. 74,807,270 ------------ EMERGING MARKETS EQUITIES -- 2.13% Brinson Emerging Markets Equity Fund................ 952,086 $ 10,063,648 ------------ Total Equities (Cost $183,698,296).................. 215,701,229 ------------
FACE AMOUNT VALUE ------------- ------------ Bonds -- 49.64% U.S. BONDS -- 20.14% U.S. CORPORATE BONDS -- 2.97% American Express Credit Account Master Trust 96-1A 6.800%, due 12/15/03............................... $ 1,280,000 $ 1,285,504 Bell South Corp. 9.125%, due 07/01/03............... 209,990 222,475 Choice Credit Card 7.200%, due 03/15/98............. 1,000,000 1,011,210 Chrysler Financial Corp. MTN 6.500%, due 08/21/97... 165,000 165,493 Delta Air Lines 10.060%, due 01/02/16............... 1,000,000 1,155,618 Ford Credit Grantor Trust 95-B 5.900%, due 10/15/00. 159,140 158,539 GMAC MTN 6.500%, due 04/19/99....................... 1,350,000 1,345,167 Green Tree Acceptance Corp. 94-A 6.900%, due 02/15/04........................................... 499,642 494,860 Green Tree Financial 94-2 8.300%, due 05/15/19...... 435,000 446,427 Lehman Brothers Holdings 7.250%, due 04/15/03....... 1,500,000 1,481,769 News America Corp. 7.750%, due 01/20/24............. 1,755,000 1,629,100 Premier Auto Trust 4.220%, due 03/02/99............. 45,500 44,688 Salomon, Inc. 6.750%, due 02/15/03.................. 550,000 526,798 Sears Credit Master Trust II 96-2 6.500%, due 11/15/99........................................... 315,000 315,636 Standard Credit Card Trust 94-1A 4.650%, due 02/07/97........................................... 1,065,000 1,057,087 8.250%, due 01/07/05............................... 500,000 533,075 Thrift Financial Corp. 11.250%, due 01/01/16........ 41,328 45,116 Time Warner Entertainment, Inc. 9.150%, due 02/01/23............................... 990,000 1,024,342 8.375%, due 03/15/23............................... 1,100,000 1,068,206 ------------ 14,011,110 ------------ INTERNATIONAL DOLLAR BONDS -- 2.09% AT&T Corp. 8.250%, due 01/11/00..................... 675,000 704,954 BBV International 7.000%, due 12/01/25.............. 2,200,000 1,984,004
- -------------------------------------------------------------------------------- 13 GLOBAL FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ------ ----- INTERNATIONAL DOLLAR BONDS (CONTINUED) City of Oslo 7.875%, due 02/03/97................... $ 1,200,000 $ 1,213,505 Hanson PLC Notes 6.750%, due 09/15/05............... 790,000 757,574 International Bank for Reconstruction & Development 9.875%, due 10/01/97............................... 175,000 182,836 Japanese Development Bank 8.375%, due 02/15/01...... 1,000,000 1,060,159 Korea Telecom 7.500%, due 06/01/06.................. 1,500,000 1,502,963 Petroliam Nasional 7.125%, due 08/15/05............. 450,000 443,892 Republic of Italy 6.875%, due 09/27/23.............. 150,000 135,188 Republic of South Africa 9.625%, due 12/15/99....... 1,000,000 1,043,750 Royal Bank of Scotland 7.375%, due 04/01/06......... 220,000 214,830 Swedbank FRN 7.718%, due 10/29/49................... 300,000 308,250 Telstra Corp. Ltd. 6.500%, due 11/28/05............. 350,000 332,740 ------------ 9,884,645 ------------ U.S. GOVERNMENT AGENCIES -- 6.02% Federal Home Loan Mortgage Corp. 9.200%, due 08/25/97............................... 200,000 206,826 9.000%, due 03/01/17............................... 446,060 470,045 5.800%, due 08/15/19............................... 2,025,000 1,823,675 Federal Home Loan Mortgage Corp. Gold 9.500%, due 10/01/20............................... 606,366 646,283 8.000%, due 05/01/23............................... 1,937,351 1,954,893 9.000%, due 05/01/24............................... 1,260,700 1,323,256 Federal National Mortgage Association 7.600%, due 01/10/97............................... 200,000 202,012 5.000%, due 06/01/01............................... 1,734,960 1,620,366 7.000%, due 03/01/03............................... 1,250,000 1,245,313 6.220%, due 03/13/06............................... 1,700,000 1,605,191 6.700%, due 08/25/20............................... 2,345,000 2,198,953 9.000%, due 08/01/21............................... 342,544 359,592 6.500%, due 08/25/21............................... 1,500,000 1,382,535 8.200%, due 08/25/21............................... 64,406 65,490 8.000%, due 05/01/22............................... 184,196 185,633 8.500%, due 07/01/22............................... 845,692 875,029 8.500%, due 08/01/23............................... 437,635 449,119 7.500%, due 05/01/25............................... 2,016,015 1,990,170 3.000%, due 03/01/26............................... 1,250,000 1,169,131 6.500%, due 03/01/26............................... 1,246,509 1,165,866 6.500%, due 03/01/26............................... 1,200,000 1,122,366 7.000%, due 03/01/26............................... 745,000 716,825 Federal National Mortgage Association Principal Strips 0.000%, due 11/01/01(e)............................ 225,000 220,476
FACE AMOUNT OR SHARES VALUE ----------- ----- Government National Mortgage Association 11.000%, due 09/15/15.............................. $ 275,347 $ 308,129 8.500%, due 05/15/21............................... 75,654 77,782 8.000%, due 08/15/22............................... 524,840 531,983 8.000%, due 11/15/22............................... 533,079 540,334 8.000%, due 12/15/22............................... 1,820,878 1,845,660 7.500%, due 03/15/26............................... 895,000 881,849 6.500%, due 03/20/26............................... 1,145,028 1,059,500 Tennessee Valley Authority 6.875%, due 12/15/43..... 170,000 150,308 ------------ 28,394,590 ------------ U.S. GOVERNMENT OBLIGATIONS-- 9.06% U.S. Treasury Coupon Strips 0.000%, due 02/15/03............................... 225,000 146,068 0.000%, due 05/15/03............................... 7,000,000 4,462,360 U.S. Treasury Notes and Bonds 6.625%, due 03/31/97............................... 435,000 437,855 5.500%, due 11/15/98............................... 985,000 969,609 6.375%, due 03/31/01............................... 10,805,000 10,754,346 5.750%, due 08/15/03............................... 6,600,000 6,280,309 6.500%, due 05/15/05............................... 5,855,000 5,772,661 8.125%, due 05/15/21............................... 1,155,000 1,301,179 U.S. Treasury Principal Strips 0.000%, due 11/15/04............................... 11,435,000 6,527,441 0.000%, due 05/15/05............................... 7,315,000 4,027,785 0.000%, due 02/15/15............................... 7,630,000 2,062,160 ------------ 42,741,773 ------------ Total U.S. Bonds.................................... 95,032,118 ------------ HIGH YIELD BONDS -- 2.55% Brinson High Yield Fund............................. 1,065,360 12,034,624 ------------ NON-U.S. BONDS -- 23.72% AUSTRALIA -- 1.30% Government of Australia 9.750%, due 03/15/02............................... AUD 3,700,000 3,041,281 9.000%, due 09/15/04............................... 3,900,000 3,101,643 ------------ 6,142,924 ------------ BELGIUM -- 1.09% Kingdom of Belgium 8.750%, due 06/25/02............................... BEF 32,000,000 1,161,049 9.000%, due 03/28/03............................... 54,000,000 1,983,402 8.500%, due 10/01/07............................... 56,000,000 2,007,169 ------------ 5,151,620 ------------ CANADA -- 2.43% Government of Canada 7.500%, due 09/01/00............................... CAD 4,350,000 3,257,276 7.250%, due 06/01/03............................... 2,600,000 1,891,740 4.250%, due 12/01/21 (d)........................... 5,500,000 3,973,613 9.000%, due 06/01/25............................... 2,085,000 1,673,512 4.250%, due 12/01/26 (d)........................... 1,000,000 687,572 ------------ 11,483,713 ------------
- -------------------------------------------------------------------------------- 14 GLOBAL FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - --------------------------------------------------------------------------------
FACE AMOUNT OR SHARES VALUE ----------- ----- DENMARK -- 2.39% Kingdom of Denmark 9.000%, due 11/15/98............................. DKK 2,100,000 $ 388,406 9.000%, due 11/15/00............................. 14,600,000 2,756,854 8.000%, due 05/15/03............................. 12,000,000 2,165,655 7.000%, due 12/15/04............................. 17,500,000 2,952,372 8.000%, due 03/15/06............................. 10,500,000 1,861,829 7.000%, due 11/10/24............................. 7,900,000 1,161,052 ------------ 11,286,168 ------------ FRANCE -- 3.13% Government of France (OAT) 8.500%, due 03/28/00............................. FRF 5,900,000 1,268,019 9.500%, due 01/25/01............................. 8,300,000 1,865,565 8.500%, due 04/25/03............................. 6,500,000 1,429,293 8.250%, due 02/27/04............................. 10,700,000 2,316,878 7.500%, due 04/25/05............................. 22,400,000 4,664,926 8.500%, due 12/26/12............................. 14,500,000 3,250,107 ------------ 14,794,788 ------------ GERMANY -- 5.14% Bundesrepublik Deutscheland 7.000%, due 09/20/99............................. DEM 7,000,000 4,873,004 8.500%, due 08/21/00............................. 2,600,000 1,901,702 8.375%, due 05/21/01............................. 1,900,000 1,393,075 8.000%, due 07/22/02............................. 1,950,000 1,410,134 6.500%, due 07/15/03............................. 4,800,000 3,198,003 6.750%, due 07/15/04............................. 7,800,000 5,234,676 6.250%, due 01/04/24............................. 2,900,000 1,675,678 Treuhandanstalt 7.750%, due 10/01/02............................. 4,650,000 3,318,636 6.250%, due 03/04/04............................. 1,900,000 1,240,411 ------------ 24,245,319 ------------ ITALY -- 2.54% Republic of Italy (BTP) 7.875%, due 10/01/96............................. ITL2,100,000,000 1,371,003 7.437%, due 01/01/99............................. 3,100,000,000 2,035,793 8.312%, due 12/01/99............................. 1,900,000,000 1,277,243 10.062%, due 03/01/03............................ 3,500,000,000 2,556,246 7.875%, due 10/01/03............................. 3,300,000,000 2,163,905 7.437%, due 04/01/04............................. 3,100,000,000 1,968,654 8.312%, due 12/01/07............................. 900,000,000 594,618 ------------ 11,967,462 ------------ NETHERLANDS -- 3.06% Government of Nederlands 6.250%, due 07/15/98............................. NLG 1,400,000 853,829 8.500%, due 03/15/01............................. 1,000,000 659,382 8.750%, due 09/15/01............................. 1,300,000 870,145 6.500%, due 04/15/03............................. 3,100,000 1,870,643 8.500%, due 06/01/06............................. 8,650,000 5,817,681 8.250%, due 02/15/07............................. 4,500,000 2,973,812 7.500%, due 04/15/10............................. 2,200,000 1,376,530 ------------ 14,422,022 ------------ SPAIN -- 1.06% Government of Spain 7.400%, due 07/30/99............................. ESP 510,000,000 $ 3,953,158 11.300%, due 01/15/02............................ 60,000,000 525,915 8.200%, due 02/28/09............................. 70,000,000 514,473 ------------ 4,993,546 ------------ UNITED KINGDOM -- 1.58% UK Treasury 7.000%, due 11/06/01............................. GBP 810,000 1,239,860 8.000%, due 06/10/03............................. 1,400,000 2,216,395 8.500%, due 12/07/05............................. 2,470,000 4,002,714 ------------ 7,458,969 ------------ Total Non-U.S. Bonds.............................. 111,946,531 ------------ EMERGING MARKETS DEBT -- 3.23% Brinson Emerging Markets Debt Fund................ 1,118,170 15,250,052 ------------ Total Bonds (Cost $232,143,982)................... 234,263,325 ------------ Short-Term Investments -- 4.14% U.S. GOVERNMENT OBLIGATIONS-- 0.19% U.S. Treasury Bills 5.140%, due 11/14/96.......... 930,000 911,941 ------------ COMMERCIAL PAPER -- 3.95% Airtouch Communications, Inc. 5.500%, due 07/01/96......................................... 1,000,000 1,000,000 Baxter International, Inc. 5.550%, due 07/10/96... 2,000,000 1,997,225 Dial Corp. 5.550%, due 07/17/96................... 1,000,000 997,533 FMC Corp. 5.480%, due 07/08/96.................... 1,500,000 1,498,402 Gatx Capital Corp. 5.500%, due 07/09/96........... 1,000,000 998,778 Kerr-McGee Credit Corp. 5.500%, due 07/09/96...... 2,000,000 1,997,556 The Limited, Inc. 5.650%, due 07/01/96............ 2,484,000 2,484,000 Lockheed Martin Corp. 5.630%, due 07/01/96........ 2,981,000 2,981,000 Melville Corp. 5.658%, due 07/01/96............... 3,660,000 3,660,000 PS Colorado Credit Corp. 5.550%, due 07/02/96..... 1,000,000 999,846 ------------ 18,614,340 ------------ Total Short-Term Investments (Cost $19,526,281)... 19,526,281 ------------ Total Investments (Cost $435,368,559)--99.48% (a) 469,490,835 ------------ Cash and other assets, less liabilities-- 0.52%.............................. 2,472,301 ------------ Net Assets--100%.................................. $471,963,136 ============
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 15 GLOBAL FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a)Aggregate cost for federal income tax purposes was $435,368,559; and net unrealized appreciation consisted of: Gross unrealized appreciation................................ $39,563,521 Gross unrealized depreciation................................ (5,441,245) ----------- Net unrealized appreciation.............................. $34,122,276 ===========
(b)Non-income producing security. (c)Denominated in U.S. dollars. (d)Linked to Canada's retail price index. Reset semi-annually. (e)Interest rate 0.00% until 11/01/96, 7.99% to maturity. FRN: Floating rate note--The rate disclosed is that in effect at June 30, 1996. MTN: Medium term note FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4) The Global Fund had the following open forward foreign currency contracts as of June 30, 1996:
SETTLEMENT LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) ---------- ------------- ----------- ---------- FORWARD FOREIGN CURRENCY BUY CONTRACTS Belgian Franc................ 12/04/96 15,000,000 $ 483,794 $ 5,094 British Pound................ 12/04/96 2,000,000 3,105,173 68,823 Canadian Dollar.............. 12/04/96 2,500,000 1,836,532 8,331 Danish Kroner................ 12/04/96 11,000,000 1,889,078 29,336 Dutch Guilder................ 12/04/96 5,000,000 2,962,639 27,893 French Franc................. 12/04/96 13,000,000 2,543,507 35,017 German Mark.................. 12/04/96 8,000,000 5,306,672 65,410 Swiss Franc.................. 12/04/96 700,000 566,693 6,693 FORWARD FOREIGN CURRENCY SALE CONTRACTS Australian Dollar............ 12/04/96 9,600,000 7,517,993 4,567 Belgian Franc................ 12/04/96 255,000,000 8,219,394 (85,423) British Pound................ 12/04/96 4,000,000 6,210,346 (178,346) Canadian Dollar.............. 12/04/96 14,500,000 10,651,884 (59,438) Danish Kroner................ 12/04/96 77,000,000 13,223,549 (185,298) Dutch Guilder................ 12/04/96 39,000,000 23,108,586 (167,409) French Franc................. 12/04/96 127,000,000 24,848,107 (309,415) German Mark.................. 12/04/96 53,000,000 35,156,699 (388,921) Japanese Yen................. 12/04/96 2,400,000,000 22,373,469 479,517 Swiss Franc.................. 12/04/96 2,900,000 2,347,726 (18,783) --------- $(662,352) =========
FUTURES CONTRACTS (NOTE 5) The Global Fund had the following open futures contracts as of June 30, 1996:
SETTLEMENT CURRENT UNREALIZED DATE COST/PROCEEDS VALUE GAIN/(LOSS) ---------- ------------- ---------- ----------- INTEREST RATE FUTURES BUY CON- TRACTS 5 Year U.S. Treasury Note, 73 contracts..................... Sept 1996 $7,728,906 $7,719,750 $(9,156) 10 Year U.S. Treasury Note, 44 contracts..................... Sept 1996 4,732,750 4,730,000 (2,750) 30 Year U.S. Treasury Bond, 32 contracts..................... Sept 1996 3,508,000 3,505,000 (3,000) INDEX FUTURES BUY CONTRACTS Topix, 16 contracts............ Sept 1996 2,471,157 2,495,956 24,799 INDEX FUTURES SALE CONTRACTS Standard & Poor's 500, 41 con- tracts........................ Sept 1996 13,937,950 13,874,400 63,550 ------- $73,443 =======
The segregated cash and market value of investments pledged to cover margin requirements for the open futures positions at June 30, 1996 were $550,000 and $911,941, respectively. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 16 GLOBAL FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1996 ASSETS: Investments, at value (Note 1): Unaffiliated issuers (Cost $392,368,559)........................ $426,419,526 Affiliated issuers (Cost $43,000,000)........................... 43,071,309 Cash............................................................. 1,092,698 Foreign currency, at value (Cost $1,860,136)..................... 1,869,053 Receivables: Investment securities sold...................................... 3,805,859 Dividends....................................................... 499,451 Interest........................................................ 4,691,390 Fund shares sold................................................ 217,359 Variation margin (Note 5)....................................... 53,189 Other assets..................................................... 17,720 ------------ TOTAL ASSETS.................................................. 481,737,554 ------------ LIABILITIES: Payables: Investment securities purchased................................. 8,505,363 Fund shares redeemed............................................ 109,118 Investment advisory fees (Note 2)............................... 305,964 Net unrealized depreciation on forward foreign currency con- tracts......................................................... 662,352 Accrued expenses................................................ 191,621 ------------ TOTAL LIABILITIES............................................. 9,774,418 ------------ NET ASSETS........................................................ $471,963,136 ============ NET ASSETS CONSIST OF: Paid in capital (Note 7)......................................... $414,032,614 Accumulated undistributed net investment income.................. 9,848,069 Accumulated net realized gain.................................... 14,638,128 Net unrealized appreciation...................................... 33,444,325 ------------ NET ASSETS.................................................... $471,963,136 ============ OFFERING PRICE PER SHARE: Brinson Class: Net asset value, offering price and redemption price per share (Based on net assets of $457,932,962 and 37,481,925 shares is- sued and outstanding) (Note 7)................................. $ 12.22 ============ SwissKey Class: Net asset value, offering price and redemption price per share (Based on net assets of $14,030,174 and 1,151,524 shares issued and outstanding) (Note 7)...................................... $ 12.18 ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 17 GLOBAL FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1996 INVESTMENT INCOME: Interest......................................................... $15,935,899 Dividends (net of $232,233 for foreign taxes withheld)........... 4,265,925 ----------- TOTAL INCOME.................................................. 20,201,824 ----------- EXPENSES: Advisory (Note 2)................................................ 3,415,057 Administration................................................... 293,601 Custodian........................................................ 146,119 Distribution (Note 6)............................................ 27,501 Other............................................................ 600,604 ----------- TOTAL EXPENSES................................................ 4,482,882 ----------- NET INVESTMENT INCOME ........................................ 15,718,942 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain on: Investments..................................................... 20,797,091 Futures contracts............................................... 1,118,185 Foreign currency transactions................................... 11,661,658 ----------- Net realized gain............................................. 33,576,934 ----------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency................................ 11,972,299 Futures contracts............................................... 73,443 Forward contracts............................................... 1,322,661 Translation of other assets and liabilities denominated in for- eign currency.................................................. (179,797) ----------- Change in net unrealized appreciation or depreciation......... 13,188,606 ----------- Net realized and unrealized gain................................. 46,765,540 ----------- Net increase in net assets resulting from operations............. $62,484,482 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 18 GLOBAL FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
YEAR YEAR ENDED ENDED JUNE 30, 1996 JUNE 30, 1995 ------------- ------------- OPERATIONS: Net investment income............................ $ 15,718,942 $ 14,388,762 Net realized gain................................ 33,576,934 2,567,030 Change in net unrealized appreciation or depreci- ation........................................... 13,188,606 23,779,745 ------------- ------------ Net increase in net assets resulting from opera- tions........................................... 62,484,482 40,735,537 ------------- ------------ DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income......... (20,214,114) (8,427,640) Distributions in excess of net investment income. (1,430,745) -- Distributions from net realized gain............. (10,937,826) (2,567,030) Distributions in excess of net realized gain..... -- (275,888) ------------- ------------ Total distributions to shareholders*............. (32,582,685) (11,270,558) ------------- ------------ CAPITAL SHARE TRANSACTIONS: Shares sold...................................... 109,483,562 124,484,442 Shares issued on reinvestment of distributions... 31,162,315 10,276,565 Shares redeemed.................................. (64,262,463) (77,406,972) ------------- ------------ Net increase in net assets resulting from capital share transactions (Note 7)..................... 76,383,414 57,354,035 ------------- ------------ TOTAL INCREASE IN NET ASSETS.................. 106,285,211 86,819,014 ------------- ------------ NET ASSETS: Beginning of year................................ 365,677,925 278,858,911 ------------- ------------ End of year (including accumulated undistributed net investment income of $9,848,069 and $4,495,172, respectively)........ $471,963,136 $365,677,925 ============= ============ *DISTRIBUTIONS BY CLASS: Distributions from and in excess of net investment income: Brinson Class.................................... $ (21,444,413) $ (8,427,640) SwissKey Class................................... (200,446) -- Distributions from and in excess of net realized gain: Brinson Class.................................... (10,892,522) (2,842,918) SwissKey Class................................... (45,304) -- ------------- ------------ $ (32,582,685) $(11,270,558) ============= ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 19 GLOBAL FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
YEAR YEAR YEAR AUGUST 31, 1992* ENDED ENDED ENDED THROUGH BRINSON CLASS JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994 JUNE 30, 1993 - ------------------------------------------------------------------------------------ Net asset value, begin- ning of period......... $ 11.35 $ 10.43 $ 10.87 $ 10.00 -------- -------- -------- -------- Income from investment operations: Net investment income. 0.44 0.43 0.33 0.26 Net realized and unrealized gain (loss)............... 1.37 0.86 (0.23) 0.81 -------- -------- -------- -------- Total income from investment opera- tions.............. 1.81 1.29 0.10 1.07 -------- -------- -------- -------- Less distributions: Distributions from and in excess of net in- vestment income............... (0.62) (0.27) (0.27) (0.20) Distributions from and in excess of net re- alized gain.......... (0.32) (0.10) (0.27) -- -------- -------- -------- -------- Total distributions. (0.94) (0.37) (0.54) (0.20) -------- -------- -------- -------- Net asset value, end of period................. $ 12.22 $ 11.35 $ 10.43 $ 10.87 ======== ======== ======== ======== Total return (non- annualized)............ 16.38% 12.57% 0.77% 10.76% Ratios/Supplemental data Net assets, end of pe- riod (in 000s)........ $457,933 $365,678 $278,859 $191,389 Ratio of expenses to average net assets: Before expense reim- bursement............ 1.04% 1.09% 1.14% 1.35%** After expense reim- bursement............ N/A N/A 1.10% 1.05%** Ratio of net investment income to average net assets: Before expense reim- bursement............ 3.69% 4.27% 3.21% 3.26%** After expense reim- bursement............ N/A N/A 3.25% 3.56%** Portfolio turnover rate.................. 142% 238% 231% 149% Average commission rate paid per share........ $ 0.0291 N/A N/A N/A
* Commencement of investment operations ** Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 20 GLOBAL FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout the period presented.
JULY 31, 1995* THROUGH SWISSKEY CLASS JUNE 30, 1996 - -------------------------------------------------------------------------------- Net asset value, beginning of period............................. $ 11.60 ------- Income from investment operations: Net investment income.......................................... 0.39 Net realized and unrealized gain............................... 1.10 ------- Total income from investment operations...................... 1.49 ------- Less distributions: Distributions from and in excess of net investment income...... (0.59) Distributions from net realized gain........................... (0.32) ------- Total distributions.......................................... (0.91) ------- Net asset value, end of period................................... $ 12.18 ======= Total return (non-annualized).................................... 13.24% Ratios/Supplemental data Net assets, end of period (in 000s)............................. $14,030 Ratio of expenses to average net assets......................... 1.69%** Ratio of net investment income to average net assets............ 3.04%** Portfolio turnover rate......................................... 142% Average commission rate paid per share.......................... $0.0291
* Commencement of SwissKey Class distribution ** Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 21 GLOBAL EQUITY FUND - -------------------------------------------------------------------------------- LOGO The Global Equity Fund is an actively managed portfolio that provides integrated asset management across and within world equity markets. The investment process is strategic in nature and is driven by deviations of market price from fundamental value. We believe this philosophy offers the greatest potential for achieving enhanced long-term returns, while controlling risk. The SwissKey Global Equity Fund has provided an unannualized return of 19.25% since its inception on July 31, 1995, compared to the 13.25% return of its benchmark, the MSCI World Equity (Free) Index. For the first half of 1996, the Fund returned 8.47% compared to the Index return of 7.29%. Major global equity markets have provided roughly similar performance year-to- date with the U.S. and Japan offering U.S. dollar hedged returns of 10.92% and 10.23% respectively. The MSCI World Equity (Free) Index provided a hedged return of 10.37%. The U.S. extended its fundamental overvaluation despite slower earnings growth and rising U.S. interest rates. Non-U.S. equity market strength came amid prospects for improved economic activity and a generally stable interest rate environment. Due to the extreme overvaluations of many equity markets, the cash allocation within the Global Equity Fund was expanded from 10% to 15% earlier in 1996. In the first half of the year this risk hedge detracted from Fund performance. The Fund's underweight of the Japanese yen and core-European currencies contributed strongly to Fund performance. The yen suffered not only from a nearly 6.00% depreciation, but also from extremely low short-term interest rates. Core European currencies also depreciated by about 6.00%, but short-term rates were similar to those in the U.S. ------------------------------------------------------------ 22 GLOBAL EQUITY FUND - -------------------------------------------------------------------------------- LOGO TOTAL RETURN
6 months ended Since 6/30/96 inception* - ----------------------------------------------------- SWISSKEY GLOBAL EQUITY FUND 8.47% 19.25% MSCI World Equity (Free) Index** 7.29 13.25 - -----------------------------------------------------
*Inception date of the SwissKey Global Equity Fund is July 31, 1995. Total return includes reinvestment of all capital gain and income distributions. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $10,000 This chart shows the growth in the value of an investment in the SwissKey Global Equity Fund and the MSCI World Equity (Free) Index if you had invested $10,000 on July 31, 1995, and had reinvested all your income dividends and capital gain distributions through June 30, 1996. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. SWISSKEY GLOBAL EQUITY FUND VS. MSCI WORLD EQUITY (FREE) INDEX Wealth Value with Dividends Reinvested [CHART APPEARS HERE] 7/31/95 6/30/96 ------- ------- SwissKey Global Equity Fund $10,000 $11,925 MSCI World Equity (Free) Index $10,000 $11,325 Fund returns are net of all fees and costs, while the Index returns are based solely on the market returns without deduction for fees or transaction costs for rebalancing. ------------------------------------------------------------ 23 GLOBAL EQUITY FUND - -------------------------------------------------------------------------------- LOGO MARKET ALLOCATION As of June 30, 1996
Current Benchmark Strategy - --------------------------------- U.S. 41.5% 31.5% Japan 22.3 19.3 Australia 1.6 2.5 Belgium 0.6 1.6 Canada 2.2 1.7 France 3.7 4.9 Germany 3.8 3.3 Hong Kong 1.8 0.0 Italy 1.6 1.7 Malaysia 1.4 1.3 Netherlands 2.3 3.3 New Zealand 0.2 1.6 Spain 1.1 1.7 Sweden 1.2 0.0 Switzerland 3.3 1.2 U.K. 9.0 9.1 Other Markets 2.4 0.3 Cash Reserves 0.0 15.0 - --------------------------------- 100.0% 100.0%
TOP TEN U.S. EQUITY HOLDINGS As of June 30, 1996
Percent of Net Assets - ---------------------- 1. Citicorp 1.99% 2. Lockheed Martin Corp. 1.94 3. Chase Manhattan Corp. 1.66 4. Burlington Northern Santa Fe 1.51 5. Enron Corp. 1.47 6. Avon Products, Inc. 1.32 7. Schering Plough Corp. 1.20 8. Kimberly- Clark Corp. 1.16 9. Mattel, Inc. 1.09 10. Aon Corp. 1.03 - ----------------------
CURRENCY ALLOCATION As of June 30, 1996
Current Benchmark Strategy - --------------------------------- U.S. 41.5% 74.5% Japan 22.3 4.3 Australia 1.6 1.6 Belgium 0.6 0.0 Canada 2.2 2.2 France 3.7 0.0 Germany 3.8 0.0 Hong Kong 1.8 0.0 Italy 1.6 3.4 Malaysia 1.4 1.3 Netherlands 2.3 0.0 New Zealand 0.2 1.6 Spain 1.1 1.7 Sweden 1.2 0.0 Switzerland 3.3 0.0 U.K. 9.0 9.1 Other Markets 2.4 0.3 - --------------------------------- 100.0% 100.0%
TOP TEN NON-U.S. EQUITY HOLDINGS As of June 30, 1996
Percent of Net Assets - ----------------------- 1. Royal Dutch Petroleum Co. 0.87% 2. Matsushita Electric Industrial Co. 0.84 3. Ito Yokado Co. Ltd. 0.80 4. Toray Industries, Inc. 0.79 5. General Electric Co. PLC 0.61 6. Lloyds TSB Group PLC 0.61 7. Sekisui House Ltd. 0.61 8. Sumitomo Bank 0.58 9. Telecom Corp of New Zealand Ltd. 0.57 10. Bank of Tokyo- Mitsubishi Ltd. 0.56 - -----------------------
------------------------------------------------------------ 24 GLOBAL EQUITY FUND - -------------------------------------------------------------------------------- LOGO INDUSTRY DIVERSIFICATION As a Percent of Net Assets As of June 30, 1996 - -------------------------------------------------------------------------------- U.S. EQUITIES Basic Industries Chemicals............................................................... 0.32% Housing/Paper........................................................... 1.43 Metals.................................................................. 0.14 ----- 1.89 Capital Investments Capital Goods........................................................... 3.56 Technology.............................................................. 1.60 ----- 5.16 Consumer Autos/Durables.......................................................... 0.40 Discretionary........................................................... 2.82 Health: Drugs........................................................... 2.92 Health: Non-Drugs....................................................... 1.47 Non-Durables............................................................ 4.18 Retail/Apparel.......................................................... 1.72 ----- 13.51 Energy................................................................... 2.06 Financial Banks................................................................... 4.36 Non-Banks............................................................... 3.93 ----- 8.29 Services................................................................. 2.56 Transportation........................................................... 1.92 Utilities................................................................ 1.57 Miscellaneous............................................................ 1.05 ----- Total U.S. Equities................................................... 38.01* -----
- ------------------------------------------------------------ NON-U.S. EQUITIES Aerospace & Military.................................................... 0.13% Airlines................................................................ 0.07 Appliances & Household Durables......................................... 1.66 Automobiles............................................................. 1.63 Banking................................................................. 6.10 Beverages & Tobacco..................................................... 1.38 Broadcasting & Publishing............................................... 0.64 Building Materials...................................................... 0.89 Business & Public Service............................................... 2.02 Chemicals............................................................... 2.38 Construction............................................................ 1.30 Data Processing......................................................... 0.67 Electric Components..................................................... 0.84 Electronics............................................................. 2.31 Energy.................................................................. 4.29 Financial Services...................................................... 0.59 Food & House Products................................................... 2.45 Forest Products......................................................... 1.07 Gold Mining............................................................. 0.07 Health & Personal Care.................................................. 1.98 Industrial Components................................................... 1.46 Insurance............................................................... 1.96 Leisure & Tourism....................................................... 0.55 Machinery & Engineering................................................. 0.97 Merchandising........................................................... 2.62 Metals.................................................................. 0.32 Miscellaneous Materials................................................. 0.88 Multi-Industry.......................................................... 2.00 Non-Ferrous Metal....................................................... 1.02 Real Estate............................................................. 0.20 Recreation.............................................................. 0.41 Shipping................................................................ 0.34 Steel................................................................... 0.71 Telecommunications...................................................... 2.06 Textiles & Apparel...................................................... 0.16 Transportation.......................................................... 0.58 Utilities............................................................... 2.94 ------ Total Non-U.S. Equities.............................................. 51.65* ------ SHORT-TERM INVESTMENTS.................................................. 10.12* ------ TOTAL INVESTMENTS.................................................... 99.78 CASH AND OTHER ASSETS, LESS LIABILITIES................................. 0.22 ------ NET ASSETS........................................................... 100.00% ======
* The Fund held a short position in stock index futures on June 30, 1996 which reduced U.S. equity exposure from 38.01% to 31.26%. The Fund held a long position in Topix futures which increased Japanese equity exposure from 1.25% to 2.03%. These two adjustments result in a net increase in the Fund's exposure to Short-Term Investments from 10.12% to 16.09%. ------------------------------------------------------------ 25 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - --------------------------------------------------------------------------------
SHARES VALUE ------ ----- Equities -- 89.66% U.S. EQUITIES -- 38.01% Aetna Life & Casualty Co................................. 6,000 $ 429,000 Allergan, Inc............................................ 10,000 392,500 Allstate Corp............................................ 5,700 260,063 Alza Corp. (b)........................................... 9,800 268,275 American Mobile Satellite Corp., Inc. (b)................ 1,100 17,050 Aon Corp................................................. 12,200 619,150 Automatic Data Processing, Inc........................... 11,500 444,187 Avon Products, Inc....................................... 17,600 794,200 Bard (C.R.), Inc......................................... 6,100 207,400 Beckman Instruments, Inc................................. 3,900 148,200 Biogen, Inc. (b)......................................... 900 49,388 Birmingham Steel Corp.................................... 3,900 63,862 Boeing Co................................................ 2,600 226,525 Boston Technology, Inc. (b).............................. 3,900 65,813 Brinker International, Inc. (b).......................... 2,800 42,000 Burlington Northern Santa Fe............................. 11,200 905,800 Centerior Energy Co...................................... 8,200 60,475 Chase Manhattan Corp..................................... 14,100 995,812 CIGNA Corp............................................... 4,900 577,588 Citicorp................................................. 14,500 1,198,063 CMS Energy Corp.......................................... 10,700 330,363 Coca-Cola Enterprises, Inc............................... 9,400 325,475 Comerica, Inc............................................ 2,700 120,488 Comverse Techonology, Inc. (b)........................... 3,000 91,500 Cooper Cameron Corp. (b)................................. 1,500 65,625 Corning, Inc............................................. 15,300 587,138 Dial Corp................................................ 8,000 229,000 EMC Corp./Mass (b)....................................... 11,100 206,737 Enron Corp............................................... 21,600 882,900 Entergy Corp............................................. 3,000 85,125 Federal Express Corp. (b)................................ 800 65,600 Federated Department Stores (b).......................... 10,300 351,488 FileNet Corp. (b)........................................ 1,500 54,750 First Data Corp.......................................... 2,902 231,072 Food Lion, Inc. Class A.................................. 13,900 110,331 Ford Motor Co............................................ 9,900 320,512 Forest Laboratories, Inc. (b)............................ 6,700 258,788 Gannett Co., Inc......................................... 6,500 459,875 General Instrument Corp. (b)............................. 15,700 453,337 Genzyme Corp. (b)........................................ 1,300 65,325 Goodyear Tire & Rubber Co................................ 11,700 564,525 Health Care and Retirement Corp. (b)..................... 5,250 124,688 Honeywell, Inc........................................... 7,900 430,550 Inland Steel Industries, Inc............................. 3,300 64,762 Interpublic Group of Companies, Inc...................... 4,900 229,688 James River Corp. of Virginia............................ 5,600 147,700 Kimberly-Clark Corp...................................... 9,000 695,250 Kroger Co. (b)........................................... 4,100 161,950 Lockheed Martin Corp..................................... 13,900 1,167,600 Lyondell Petrochemical Co................................ 10,700 258,138 Magna Group, Inc......................................... 1,900 45,600 Manor Care, Inc.......................................... 6,400 252,000 Mattel, Inc.............................................. 22,850 654,081 Melville Corp............................................ 13,300 538,650 Nabisco Holdings Corp. Class A........................... 3,400 105,400 National Semiconductor Corp. (b)......................... 11,400 176,700 Nextel Communications, Inc. Class A (b).................. 9,900 188,719 Old Republic International Corp.......................... 5,650 122,181 Owens Illinois, Inc. (b)................................. 8,700 139,200 Pentair, Inc............................................. 4,600 138,000 Pfizer, Inc.............................................. 600 42,825 Philip Morris Companies, Inc............................. 2,100 218,400 RJR Nabisco Convertible Preferred "C".................... 31,900 207,350 RJR Nabisco Holdings Corp................................ 1,200 42,450 Schering Plough Corp..................................... 11,500 721,625 Seagate Technology, Inc. (b)............................. 3,000 135,000 Sprint Corp.............................................. 7,600 319,200 State Street Boston Corp................................. 2,300 117,300 Timken Co................................................ 2,700 104,625 Transamerica Corp........................................ 2,700 220,725 Tyson Foods, Inc. Class A................................ 8,100 221,737 Ultramar Corp............................................ 4,300 124,700 US Bancorp............................................... 6,700 242,037 USF&G Corp............................................... 8,900 145,737 Westvaco Corp............................................ 2,350 70,206 Whitman Corp............................................. 4,100 98,912 WMX Technologies, Inc.................................... 12,400 406,100 York International Corp.................................. 1,400 72,450 360 Communications Co. (b)............................... 3,433 82,392 ----------- Total U.S. Equities...................................... 22,859,933 ----------- NON-U.S. EQUITIES -- 51.65% AUSTRALIA -- 2.22% Amcor Ltd................................................ 10,100 68,764 ANZ Banking Group Ltd.................................... 13,447 63,716 Boral Ltd................................................ 13,800 35,844 Broken Hill Proprietary Co. Ltd.......................... 23,450 324,295 CRA Ltd.................................................. 8,062 124,119 David Jones Ltd.......................................... 37,000 51,255 Lend Lease Corp. Ltd..................................... 6,197 95,113 M.I.M. Holdings Ltd...................................... 29,200 37,692 National Australia Bank Ltd.............................. 14,475 133,870 News Corp. Ltd........................................... 14,500 82,287 Pacific Dunlop Ltd....................................... 17,600 39,619 Qantas Airways Ltd....................................... 23,119 39,123 Santos Ltd............................................... 22,000 76,190 WMC Ltd.................................................. 7,300 52,287 Westpac Bank Corp. Ltd................................... 24,545 108,767 ----------- 1,332,941 ----------- BELGIUM -- 1.55% Delhaize-Le Lion S.A..................................... 1,200 59,945 Electrabel S.A........................................... 850 181,510 Fortis AG................................................ 580 76,089 Groupe Bruxelles Lambert S.A............................. 530 66,316 Kredietbank NV........................................... 465 139,075 Petrofina S.A............................................ 410 128,514 Societe Generale de Belgique............................. 540 40,936 Solvay S.A. Class A...................................... 165 101,252
- -------------------------------------------------------------------------------- 26 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - --------------------------------------------------------------------------------
SHARES VALUE ------ ----- BELGIUM (CONTINUED) Tractebel................................................ 200 $ 81,873 Union Miniere Group S.A. (b)............................. 720 55,157 ----------- 930,667 ----------- CANADA -- 1.77% Alcan Aluminium Ltd...................................... 2,800 85,193 Bank of Montreal......................................... 5,500 134,520 Barrick Gold Corp........................................ 1,600 43,409 Canadian Pacific Ltd..................................... 6,500 142,318 Imperial Oil Ltd......................................... 2,500 105,448 Moore Corp. Ltd.......................................... 1,200 22,452 Noranda, Inc............................................. 2,100 42,981 Norcen Energy Resources Ltd.............................. 2,500 43,845 Northern Telecom Ltd..................................... 1,400 76,120 NOVA Corp................................................ 4,300 38,888 Royal Bank of Canada..................................... 3,500 83,938 Seagram Co. Ltd.......................................... 2,400 80,404 Thomson Corp............................................. 6,500 102,812 TransCanada Pipelines Ltd................................ 4,000 59,315 ----------- 1,061,643 ----------- FINLAND -- 0.29% Merita Ltd. Class A (b).................................. 6,700 13,989 Nokia Ab Class A......................................... 2,600 95,697 Outokumpu Class A........................................ 1,000 16,789 UPM-Kymmene Corp. (b).................................... 2,200 45,507 ----------- 171,982 ----------- FRANCE -- 4.72% Accor S.A................................................ 860 120,280 Alcatel Alsthom.......................................... 1,044 91,056 Banque Nationale de Paris................................ 3,780 132,682 CEP Communications....................................... 704 59,487 CEP Communications Warrants "97" (b)..................... 704 2,051 Cie Bancaire S.A......................................... 992 111,764 Cie de Saint Gobain...................................... 1,328 177,737 Cie de Suez.............................................. 1,651 60,389 Cie Generale des Eaux.................................... 1,934 216,016 Colas.................................................... 330 59,103 Credit Local de France................................... 1,803 146,748 Elf Aquitaine S.A........................................ 1,950 143,409 GAN (b).................................................. 650 17,424 LVMH..................................................... 1,130 268,013 Michelin Class B......................................... 2,410 117,785 Pechiney S.A. Class A.................................... 1,985 80,163 Peugeot S.A.............................................. 1,990 266,338 Rhone-Poulenc Class A.................................... 4,300 113,013 SEITA.................................................... 1,200 55,012 Societe Generale......................................... 1,861 204,609 Total S.A. Class B....................................... 3,090 229,169 UAP...................................................... 3,219 65,343 Usinor Sacilor........................................... 7,200 103,846 ----------- 2,841,437 ----------- GERMANY -- 3.18% Allianz AG Holding....................................... 105 182,531 BASF AG.................................................. 290 82,593 Bayer AG................................................. 4,300 151,281 Bayerische Motoren Werke AG.............................. 170 98,174 Bayerische Vereinsbank AG................................ 2,000 55,975 Commerzbank AG........................................... 330 68,250 Daimler-Benz AG (b)...................................... 160 85,829 Daimler-Benz AG Rights (b)............................... 160 22 Deutsche Bank AG......................................... 4,650 220,265 Hoechst AG............................................... 1,700 57,408 Kaufhof Holding AG....................................... 305 115,319 M.A.N. AG................................................ 100 25,064 Mannesmann AG............................................ 430 148,032 Muenchener Rueckver AG................................... 57 116,464 Muenchener Rueckver AG Warrants "98" (b)................. 3 373 Preussag AG.............................................. 310 78,106 RWE AG................................................... 2,200 85,566 Schering AG.............................................. 850 61,624 Siemens AG............................................... 900 48,237 Thyssen AG............................................... 500 91,485 Veba AG.................................................. 2,650 140,848 ----------- 1,913,446 ----------- ITALY -- 1.38% Assicurazioni Generali................................... 4,200 96,853 Danieli & Co. Savings (Risp)............................. 8,000 28,442 Edison Spa............................................... 9,000 54,307 ENI ADR (c).............................................. 2,300 115,000 Fiat Spa-Priv............................................ 31,000 54,398 INA-Istituto Nazionale de Assicurazioni.................. 14,000 20,868 Istituto Mobilaire Italiano Spa.......................... 11,000 91,849 Italgas Spa.............................................. 13,000 48,550 La Rinascente............................................ 5,000 35,797 La Rinascente Savings (Risp)............................. 6,000 16,635 La Rinascente Warrants "99" (b).......................... 550 448 Mediobanca Spa........................................... 2,800 17,781 Montedison Spa (b)....................................... 44,000 25,574 SAI-Savings (Risp)....................................... 7,000 27,124 Telecom Italia Spa....................................... 61,000 105,251 Telecom Italia Mobile Spa................................ 67,000 91,347 ----------- 830,224 ----------- JAPAN -- 18.58% Amada Co. Ltd............................................ 18,000 193,652 Asahi Glass Co. Ltd...................................... 21,000 250,817 Bank of Tokyo-Mitsubishi Ltd............................. 14,600 339,438 Canon, Inc............................................... 15,000 311,812 Canon Sales Co., Inc..................................... 5,000 139,039 Citizen Watch Co. Ltd.................................... 16,000 133,186 Dai Nippon Printing Co. Ltd.............................. 16,000 309,259 Daiichi Pharmaceutical Co. Ltd........................... 11,000 169,491 Daikin Industries Ltd.................................... 17,000 185,993 Daiwa House Industry Co. Ltd............................. 9,000 139,495 Fanuc.................................................... 6,700 266,335
- -------------------------------------------------------------------------------- 27 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - --------------------------------------------------------------------------------
SHARES VALUE ------ ----- JAPAN (CONTINUED) Fujitsu.................................................. 10,000 $ 91,173 Hitachi Ltd.............................................. 33,000 306,889 Honda Motor Co........................................... 8,000 207,145 Inax..................................................... 21,000 208,695 Isetan................................................... 6,000 90,808 Ito Yokado Co. Ltd....................................... 8,000 482,124 Kaneka Corp.............................................. 9,000 60,475 Keio Teito Electric Railway.............................. 19,000 112,599 Kinki Nippon Railway..................................... 19,000 136,678 Kirin Brewery Co. Ltd.................................... 18,000 219,910 Kokuyo................................................... 4,000 110,502 Kuraray Co. Ltd.......................................... 15,000 168,214 Maeda Road Construction.................................. 3,000 51,695 Marui Co. Ltd............................................ 2,000 44,310 Matsushita Electric Industrial Co........................ 27,000 502,182 Mitsubishi Paper Mills................................... 21,000 131,153 NGK Insulators........................................... 27,000 302,786 Nintendo Corp. Ltd....................................... 1,500 111,596 Nippon Denso Co. Ltd..................................... 12,000 260,391 Nippon Meat Packers, Inc................................. 11,000 156,453 Nippon Steel Co.......................................... 14,000 47,994 Okumura.................................................. 12,000 100,218 Osaka Gas Co............................................. 68,000 248,611 Pioneer Electronic Corp.................................. 3,000 71,389 Sankyo Co. Ltd........................................... 12,000 310,718 Secom.................................................... 4,000 264,037 Seino Transportation..................................... 6,000 94,638 Sekisui House Ltd........................................ 32,000 364,693 Shinmaywa Industries Ltd................................. 15,000 153,171 Sony Corp................................................ 5,000 328,679 Sumitomo Bank............................................ 18,000 347,917 Sumitomo Electric Industries............................. 14,000 200,397 Takeda Chemical Industries............................... 13,000 229,939 TDK Corp................................................. 4,000 238,509 Tokio Marine & Fire Insurance Co......................... 16,000 212,981 Tokyo Electric Power..................................... 7,300 185,027 Tokyo Steel Mfg.......................................... 12,500 245,028 Tonen Corp............................................... 13,000 190,825 Toray Industries, Inc.................................... 69,000 475,596 Toshiba Corp............................................. 40,000 284,460 Toyo Suisan Kaisha....................................... 9,000 109,955 Toyota Motor Corp........................................ 5,000 124,907 Yamazaki Baking Co. Ltd.................................. 8,000 148,065 ----------- 11,172,049 ----------- MALAYSIA -- 1.25% Genting Bhd.............................................. 3,000 23,445 Hume Industries (Malaysia) Bhd........................... 8,000 39,115 Kuala Lumpur Kepong Bhd.................................. 25,000 63,121 Land & General Holdings Bhd.............................. 18,000 44,365 Malayan Banking Bhd...................................... 9,600 92,337 Malaysia International Shipping Bhd (Frgn.).............. 10,000 31,060 Nestle (Malaysia) Bhd.................................... 4,000 32,222 Public Bank Bhd (Frgn.).................................. 23,000 63,602 Resorts World Bhd........................................ 4,000 22,924 Sime Darby Bhd........................................... 31,000 85,725 Telekom Malaysia Bhd..................................... 14,000 124,559 Tenaga Nasional Bhd...................................... 26,000 109,410 YTL Corp. Bhd............................................ 4,000 20,840 ----------- 752,725 ----------- NETHERLANDS -- 3.27% ABN AMRO Holdings NV..................................... 3,454 185,357 Akzo Nobel NV............................................ 300 35,942 DSM NV................................................... 680 67,526 Hoogovens NV............................................. 900 33,324 ING Groep NV............................................. 8,122 242,199 KPN NV................................................... 4,493 170,044 Philips Electronics NV................................... 2,850 92,668 Royal Dutch Petroleum Co................................. 3,400 525,069 Royal Dutch Petroleum Co. NY Shares (c).................. 1,200 184,500 Unilever NV.............................................. 1,750 253,237 Vendex International NV.................................. 2,400 83,661 VNU-Ver Ned Uitgevers.................................... 6,000 93,151 ----------- 1,966,678 ----------- NEW ZEALAND -- 1.67% Brierley Investments Ltd................................. 201,000 190,025 Carter Holt Harvey Ltd................................... 90,500 206,457 Fletcher Challenge Building.............................. 22,750 44,418 Fletcher Challenge Energy................................ 22,550 49,744 Fletcher Challenge Forest Ltd............................ 7,803 9,675 Fletcher Challenge Paper................................. 45,500 87,902 Telecom Corp. of New Zealand Ltd......................... 82,000 343,797 Telecom Corp. of New Zealand Ltd. ADS (c)................ 1,100 73,425 ----------- 1,005,443 ----------- SPAIN -- 1.61% Banco Bilbao Vizcaya S.A................................. 1,800 72,864 Banco Central Hispanoamericano........................... 800 16,286 Banco Intercontinental Espanol S.A....................... 600 67,061 Banco Popular Espanol S.A................................ 400 71,258 Banco Santander S.A...................................... 1,600 74,627 Cia Sevillana de Electricidad............................ 6,300 57,983 Empresa Nacional de Electridad S.A....................... 2,050 127,754 Fomento de Construcciones y Contratas S.A........................................... 500 41,338 Iberdrola S.A............................................ 13,000 133,335 Repsol S.A............................................... 2,600 90,343 Telefonica de Espana..................................... 8,600 158,302 Vallehermosa S.A......................................... 1,200 23,680 Viscofan Envolturas Celulosicas S.A...................... 2,300 36,327 ----------- 971,158 ----------- SWITZERLAND -- 1.31% ABB AG (Bearer).......................................... 30 37,105 Ciba-Geigy AG (Reg.)..................................... 95 115,752 CS Holdings AG (Reg.).................................... 696 66,174 Nestle S.A. (Reg.)....................................... 213 243,190 Roche Holding AG (Gen.).................................. 18 137,272
- -------------------------------------------------------------------------------- 28 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - --------------------------------------------------------------------------------
SHARES VALUE ------ ----- SWITZERLAND (CONTINUED) Schweiz Bankgesellschaft (Bearer)......................... 72 $ 70,470 Societe Generale de Surveillance Holding S.A. (Bearer).... 27 64,609 Zurich Versicherungs (Reg.)............................... 203 55,308 ----------- 789,880 ----------- UNITED KINGDOM -- 8.85% Asda Group PLC............................................ 26,000 47,071 Bass PLC.................................................. 12,800 160,920 B.A.T. Industries PLC..................................... 21,000 163,497 Booker PLC................................................ 6,500 38,081 British Gas PLC........................................... 61,500 171,072 British Petroleum Co. PLC................................. 33,835 296,812 British Steel PLC......................................... 52,000 132,929 British Telecommunications PLC............................ 58,700 315,621 Charter PLC............................................... 7,431 107,163 Coats Viyella PLC......................................... 35,000 93,551 FKI PLC................................................... 30,875 81,566 General Electric Co. PLC.................................. 68,100 367,221 Glaxo Wellcome PLC........................................ 11,500 154,852 Grand Metropolitan PLC.................................... 38,000 252,152 Guinness PLC.............................................. 28,300 205,818 Hanson PLC................................................ 35,000 98,174 Hillsdown Holdings PLC.................................... 25,000 67,599 House of Fraser PLC....................................... 47,000 127,086 Legal & General Group PLC................................. 7,700 80,051 Lloyds Abbey Life PLC..................................... 10,500 83,380 Lloyds TSB Group PLC...................................... 74,630 365,321 Marks & Spencer PLC....................................... 15,500 113,329 Mirror Group PLC.......................................... 16,000 50,971 National Power PLC........................................ 12,000 96,970 National Westminster Bank PLC............................. 17,800 170,393 Ocean Group PLC........................................... 11,500 81,671 Peninsular & Oriental Steam Navigation Co................. 12,000 90,629 Reckitt & Colman PLC...................................... 10,500 110,303 Redland PLC............................................... 6,500 40,505 RJB Mining PLC............................................ 10,000 85,936 Rolls-Royce PLC........................................... 22,400 77,974 Royal Insurance Holdings PLC.............................. 11,900 73,601 RTZ Corp. PLC............................................. 8,200 121,439 Scottish Hydro-Electric PLC............................... 9,200 42,319 Sears PLC................................................. 52,000 80,000 Sedgwick Group PLC........................................ 37,000 79,347 SmithKline Beecham PLC.................................... 11,900 127,322 Tesco PLC................................................. 34,000 155,338 Thames Water PLC.......................................... 10,000 88,112 Unilever PLC.............................................. 5,500 109,402 Vodafone Group PLC........................................ 13,600 50,723 W.H. Smith Group PLC...................................... 9,000 66,434 ----------- 5,322,655 ----------- Total Non-U.S. Equities................................... 31,062,928 ----------- Total Equities (Cost $48,067,795)......................... 53,922,861 -----------
FACE AMOUNT VALUE ------ ----- Short-Term Investments --10.12% U.S. GOVERNMENT OBLIGATIONS -- 0.37% U.S. Treasury Bills 5.140%, due 11/14/96................ $ 225,000 $ 220,631 ----------- COMMERCIAL PAPER -- 9.75% Baxter International, Inc. 5.550%, due 07/10/96................................... 300,000 299,584 FMC Corp. 5.480%, due 07/08/96.......................... 250,000 249,733 Gatx Capital Corp. 5.500%, due 07/09/96................. 750,000 749,083 Kerr-McGee Credit Corp. 5.500%, due 07/09/96................................... 1,000,000 998,778 The Limited, Inc. 5.650%, due 07/01/96.................. 1,065,000 1,065,000 Lockheed Martin Corp. 5.630%, due 07/01/96................................... 1,000,000 1,000,000 Melville Corp. 5.650%, due 07/01/96..................... 1,000,000 1,000,000 PS Colorado Credit Corp. 5.550%, due 07/02/96................................... 500,000 499,923 ----------- 5,862,101 ----------- Total Short-Term Investments (Cost $6,082,732)...................................... 6,082,732 ----------- Total Investments (Cost $54,150,527) -- 99.78% (a)....................... 60,005,593 ----------- Cash and other assets, less liabilities --0.22%......... 132,489 ----------- Net Assets -- 100%...................................... $60,138,082 ===========
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 29 GLOBAL EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a)Aggregate cost for federal income tax purposes was $54,150,527; and net unrealized appreciation consisted of: Gross unrealized appreciation................................ $ 7,101,995 Gross unrealized depreciation................................ (1,246,929) ----------- Net unrealized appreciation.............................. $ 5,855,066 ===========
(b)Non-income producing security (c)Denominated in U.S. dollars FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4) The Global Equity Fund had the following open forward foreign currency contracts as of June 30, 1996:
SETTLEMENT LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) ---------- ------------- ---------- ----------- FORWARD FOREIGN CURRENCY BUY CONTRACTS Canadian Dollar............. 12/04/96 430,000 $ 315,883 $ 1,714 Italian Lira................ 12/04/96 1,620,000,000 1,037,810 12,202 FORWARD FOREIGN CURRENCY SALE CONTRACTS Australian Dollar........... 12/04/96 620,000 485,537 5,193 Belgian Franc............... 12/04/96 28,000,000 902,522 (10,688) Dutch Guilder............... 12/04/96 3,300,000 1,955,342 (20,085) French Franc................ 12/04/96 13,750,000 2,690,248 (39,748) German Mark................. 12/04/96 2,600,000 1,724,668 (23,432) Japanese Yen................ 12/04/96 840,000,000 7,830,714 88,584 Swiss Franc................. 12/04/96 900,000 728,605 (9,984) -------- Total................... $ 3,756 ========
FUTURES CONTRACTS (NOTE 5) INDEX FUTURES CONTRACTS: The Global Equity Fund had the following open index futures contracts as of June 30, 1996:
SETTLEMENT CURRENT UNREALIZED DATE COST/PROCEEDS VALUE GAIN ---------- ------------- ---------- ---------- INDEX FUTURES BUY CONTRACTS Topix, 3 contracts.............. Sept 1996 $ 459,695 $ 467,992 $ 8,297 INDEX FUTURES SALE CONTRACTS Standard & Poor's 500, 12 con- tracts......................... Sept 1996 4,079,400 4,060,800 18,600 ------- Total........................ $26,897 =======
The segregated cash and market value of investments pledged to cover margin requirements for the open futures positions at June 30, 1996 was $100,200 and $220,631, respectively. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 30 GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1996 ASSETS: Investments, at value (Cost $54,150,527) (Note 1)................. $60,005,593 Cash.............................................................. 169,435 Foreign currency, at value (Cost $437,680)........................ 440,249 Receivables: Investment securities sold....................................... 218,470 Dividends........................................................ 147,249 Fund shares sold................................................. 2,862 Net unrealized appreciation on forward foreign currency con- tracts.......................................................... 3,756 Other assets...................................................... 6,965 ----------- TOTAL ASSETS................................................... 60,994,579 ----------- LIABILITIES: Payables: Investment securities purchased.................................. 663,419 Variation margin (Note 5)........................................ 14,203 Investment advisory fees (Note 2)................................ 35,761 Accrued expenses................................................. 143,114 ----------- TOTAL LIABILITIES.............................................. 856,497 ----------- NET ASSETS......................................................... $60,138,082 =========== NET ASSETS CONSIST OF: Paid in capital (Note 7).......................................... $49,837,041 Accumulated undistributed net investment income................... 90,547 Accumulated net realized gain..................................... 4,320,936 Net unrealized appreciation....................................... 5,889,558 ----------- NET ASSETS..................................................... $60,138,082 =========== OFFERING PRICE PER SHARE: Brinson Class: Net asset value, offering price and redemption price per share (Based on net assets of $27,126,163 and 2,343,988 shares issued and outstanding) (Note 7)....................................... $ 11.57 =========== SwissKey Class: Net asset value, offering price and redemption price per share (Based on net assets of $33,011,919 and 2,852,778 shares issued and outstanding) (Note 7)....................................... $ 11.57 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 31 GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1996 INVESTMENT INCOME: Dividends (net of $82,247 for foreign taxes withheld)............. $1,003,890 Interest.......................................................... 139,095 ---------- TOTAL INCOME................................................... 1,142,985 ---------- EXPENSES: Advisory (Note 2)................................................. 390,824 Distribution (Note 6)............................................. 191,849 Accounting........................................................ 104,928 Custodian......................................................... 80,000 Professional...................................................... 75,874 Transfer agent.................................................... 64,499 Printing.......................................................... 63,644 Other............................................................. 87,389 ---------- TOTAL EXPENSES................................................. 1,059,007 Expenses waived by Advisor (Note 2)............................ (378,626) ---------- NET EXPENSES................................................... 680,381 ---------- NET INVESTMENT INCOME ......................................... 462,604 ---------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments...................................................... 5,977,773 Futures contracts................................................ (481,131) Foreign currency transactions.................................... 2,763,124 ---------- Net realized gain.............................................. 8,259,766 ---------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency................................. 1,152,333 Futures contracts................................................ 53,797 Forward contracts................................................ 52,974 Translation of other assets and liabilities denominated in for- eign currency................................................... (397) ---------- Change in net unrealized appreciation or depreciation.......... 1,258,707 ---------- Net realized and unrealized gain................................... 9,518,473 ---------- Net increase in net assets resulting from operations............... $9,981,077 ==========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 32 GLOBAL EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
YEAR YEAR ENDED ENDED JUNE 30, JUNE 30, 1996 1995 ------------- ----------- OPERATIONS: Net investment income.............................. $ 462,604 $ 361,529 Net realized gain (loss)........................... 8,259,766 (947,502) Change in net unrealized appreciation or depreciation...................................... 1,258,707 1,778,802 ----------- ----------- Net increase in net assets resulting from opera- tions............................................. 9,981,077 1,192,829 ----------- ----------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income........... (337,038) (72,633) Distributions from net realized gain............... (3,021,585) -- Distributions in excess of net realized gain....... -- (198,395) ----------- ----------- Total distributions to shareholders*............... (3,358,623) (271,028) ----------- ----------- CAPITAL SHARE TRANSACTIONS: Shares sold........................................ 11,563,213 133,064 Shares issued in acquisition of SBC World Growth Fund (Note 1)..................................... 25,670,575 -- Shares issued on reinvestment of distributions..... 3,336,320 271,028 Shares redeemed.................................... (7,760,045) (1,262,526) ----------- ----------- Net increase (decrease) in net assets resulting from capital share transactions (Note 7)............................. 32,810,063 (858,434) ----------- ----------- TOTAL INCREASE IN NET ASSETS.................... 39,432,517 63,367 ----------- ----------- NET ASSETS: Beginning of year.................................. 20,705,565 20,642,198 ----------- ----------- End of year (including accumulated undistributed net investment income of $90,547 and $59,734, re- spectively)....................................... $60,138,082 $20,705,565 =========== =========== *DISTRIBUTIONS BY CLASS: Distributions from net investment income: Brinson Class...................................... $ (295,340) $ (72,633) SwissKey Class..................................... (41,698) -- Distributions from and in excess of net realized gain: Brinson Class...................................... (1,399,995) (198,395) SwissKey Class..................................... (1,621,590) -- ----------- ----------- $(3,358,623) $ (271,028) =========== ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 33 GLOBAL EQUITY FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
YEAR YEAR JANUARY 28, 1994* ENDED ENDED THROUGH BRINSON CLASS JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994 - -------------------------------------------------------------------------------- Net asset value, beginning of pe- riod............................ $ 9.93 $ 9.49 $ 10.00 ------- ------- ------- Income from investment opera- tions: Net investment income (loss)... 0.18 0.18 0.07 Net realized and unrealized gain (loss)................... 2.29 0.39 (0.54) ------- ------- ------- Total income (loss) from in- vestment operations......... 2.47 0.57 (0.47) ------- ------- ------- Less distributions: Distributions from net invest- ment income................... (0.14) (0.04) (0.04) Distributions from and in ex- cess of net realized gain..... (0.69) (0.09) -- ------- ------- ------- Total distributions.......... (0.83) (0.13) (0.04) ------- ------- ------- Net asset value, end of period... $ 11.57 $ 9.93 $ 9.49 ======= ======= ======= Total return (non-annualized).... 25.66% 6.06% (4.70%) Ratios/Supplemental data Net assets, end of period (in 000s).......................... $27,126 $20,706 $20,642 Ratio of expenses to average net assets: Before expense reimbursement... 1.77% 2.06% 2.65%** After expense reimbursement.... 1.00% 1.00% 1.00%** Ratio of net investment income to average net assets: Before expense reimbursement... 0.57% 0.71% 0.24%** After expense reimbursement.... 1.34% 1.77% 1.89%** Portfolio turnover rate......... 74% 36% 21% Average commission rate paid per share.......................... $0.0288 N/A N/A
* Commencement of investment operations ** Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 34 GLOBAL EQUITY FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout the period presented.
JULY 31, 1995* THROUGH SWISSKEY CLASS JUNE 30, 1996 - ------------------------------------------------------------------------------- Net asset value, beginning of period............................ $ 10.35 ------- Income from investment operations: Net investment loss........................................... (0.01) Net realized and unrealized gain.............................. 1.93 ------- Total income from investment operations..................... 1.92 ------- Less distributions: Distributions from net investment income...................... (0.01) Distributions from net realized gain.......................... (0.69) ------- Total distributions......................................... (0.70) ------- Net asset value, end of period.................................. $ 11.57 ======= Total return (non-annualized)................................... 19.25% Ratios/Supplemental data Net assets, end of period (in 000s)............................ $33,012 Ratio of expenses to average net assets: Before expense reimbursement.................................. 2.53%** After expense reimbursement................................... 1.76%** Ratio of net investment income (loss) to average net assets: Before expense reimbursement.................................. (0.19%)** After expense reimbursement................................... 0.58%** Portfolio turnover rate........................................ 74% Average commission rate paid per share......................... $0.0288
* Commencement of SwissKey Class distribution ** Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 35 GLOBAL BOND FUND - -------------------------------------------------------------------------------- LOGO The Global Bond Fund is an actively managed portfolio that provides integrated asset management across and within world fixed income markets. The investment process is strategic in nature and is driven by deviations of market price from fundamental value. We believe this philosophy offers the greatest potential for achieving enhanced long-term returns, while controlling risk. The SwissKey Global Bond Fund has provided an unannualized return of 9.17% since July 31, 1995 (performance inception date). Its benchmark, the Salomon World Government Bond Index, returned 0.13%. In the first half of 1996, the Fund produced a return of 1.82% compared to the -1.47% return of the benchmark. Below is a discussion of the global bond markets as well as our current investment strategies. In the first half of 1996, the Global Bond Fund benefited from a continued environment of low inflation. The U.S. bond market, which is an underweight in the Fund, was a notable exception to the positive U.S. dollar-hedged returns provided by other bond markets. The U.S. bond market was detrimentally affected by stronger than expected growth in economic activity in general and strong employment gains in particular. U.S. market participants' fears included higher inflation and the potential for a tighter monetary policy as reflected in higher short-term interest rates. Otherwise, global bond markets provided positive year-to-date hedged returns. The Japan bond market underweight detracted from performance as continued Bank of Japan accommodation sustained interest rates at below equilibrium levels. Low Japanese interest rates do not appear to be fundamentally sustainable and we do not expect the relatively favorable performance of the bond market to continue. The Fund's underweight of the Japanese yen and core-European currencies contributed strongly to Fund performance. The yen suffered not only from a nearly 6.00% depreciation, but also from extremely low short-term interest rates. Core European currencies also depreciated by about 6.00%, but short-term rates were similar to those in the U.S. ------------------------------------------------------------ 36 GLOBAL BOND FUND - -------------------------------------------------------------------------------- LOGO TOTAL RETURN
6 months ended Since 6/30/96 Inception* - -------------------------------------------------------- SWISSKEY GLOBAL BOND FUND 1.82% 9.17% Salomon World Government Bond Index -1.47 0.13 - --------------------------------------------------------
*Inception date of the SwissKey Global Bond Fund is July 31, 1995. Total return includes reinvestment of all capital gain and income distributions. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $10,000 This chart shows the growth in the value of an investment in the SwissKey Global Bond Fund and the Salomon World Government Bond Index if you had invested $10,000 on July 31, 1995, and had reinvested all your income dividends and capital gain distributions through June 30, 1996. No adjustment has been made for any income taxes payable by shareholders on income dividends and capital gain distributions. Past performance is no guarantee of future results. Share price and return will vary with market conditions; investors may realize a gain or loss upon redemption. SWISSKEY GLOBAL BOND FUND VS. SALOMON WORLD GOVERNMENT BOND INDEX Wealth Value with Dividends Reinvested [CHART APPEARS HERE] 7/31/95 6/30/96 ------- ------- Swisskey Global Bond Fund $10,000 $10,917 Salomon World Government Bond Index $10,000 $10,013 Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. ------------------------------------------------------------ 37 GLOBAL BOND FUND - -------------------------------------------------------------------------------- LOGO ASSET ALLOCATION As of June 30, 1996
Current Benchmark Strategy - ------------------------------- U.S. 33.3% 27.3% Japan 19.5 5.0 Australia 1.0 3.5 Austria 0.9 0.0 Belgium 2.6 2.9 Canada 3.0 7.0 Denmark 1.7 6.8 Finland 0.4 0.0 France 7.5 8.5 Germany 10.3 15.3 Italy 6.4 7.3 Netherlands 3.4 8.8 Spain 2.4 2.8 Sweden 1.7 0.0 Switzerland 0.4 0.0 U.K. 5.5 4.8 - ------------------------------- 100.0% 100.0%
INDUSTRY DIVERSIFICATION As a Percent of Net Assets As of June 30, 1996 - -------------------------------------------------------------------------------- U.S. BONDS Corporate Bonds Asset-Backed........................................................... 0.79% CMO.................................................................... 0.45 Consumer............................................................... 0.21 Financial.............................................................. 1.34 Telecommunications..................................................... 0.57 Transportation......................................................... 0.26 ------ 3.62 International Dollar Bonds............................................. 1.16 U.S. Government Agencies............................................... 7.04 U.S. Government Obligations............................................ 10.51 ------ Total U.S. Bonds..................................................... 22.33* ------ NON-U.S. BONDS Foreign Financial Bonds................................................. 22.97 Foreign Government Bonds................................................ 45.36 ------ Total Non-U.S. Bonds................................................. 68.33 ------ SHORT-TERM INVESTMENTS.................................................. 7.92* ------ TOTAL INVESTMENTS.................................................... 98.58 CASH AND OTHER ASSETS, LESS LIABILITIES................................. 1.42 ------ NET ASSETS........................................................... 100.00% ====== - --------------------------------------------------------------------------------
*The Fund held a long position in U.S. Treasury futures on June 30, 1996 which increased U.S. bond exposure from 22.33% to 26.64% and decreased the Fund's exposure to Short-Term Investments from 7.92% to 3.61%. CURRENCY ALLOCATION As of June 30, 1996
Current Benchmark Strategy - ------------------------------- U.S. 33.3% 76.6% Japan 19.5 1.5 Australia 1.0 1.0 Austria 0.9 0.0 Belgium 2.6 0.0 Canada 3.0 3.1 Denmark 1.7 0.0 Finland 0.4 0.0 France 7.5 0.0 Germany 10.3 0.0 Italy 6.4 9.5 Netherlands 3.4 0.0 Spain 2.4 2.8 Sweden 1.7 0.0 Switzerland 0.4 0.0 U.K. 5.5 5.5 - ------------------------------- 100.0% 100.0%
------------------------------------------------------------ 38 GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ------ ----- Bonds -- 90.66% U.S. BONDS -- 22.33% U.S. CORPORATE BONDS -- 3.62% Chrysler Financial Corp. MTN 6.500%, due 08/21/97.................................... $ 165,000 $ 165,493 Delta Air Lines 10.060%, due 01/02/16................................... 100,000 115,562 Farmers Insurance Exchange 144-A 8.625%, due 05/01/24.................................... 250,000 236,313 Ford Credit Auto Lease Trust 6.350%, due 10/15/98.................................... 175,580 176,145 Ford Credit Grantor Trust 95-B 5.900%, due 10/15/00.................................... 83,549 83,223 GMAC MTN 6.750%, due 06/10/02.................................... 200,000 196,734 Green Tree Acceptance Corp. 94-A 6.900%, due 02/15/04.................................... 35,689 35,347 Green Tree Financial 94-2 8.300%, due 05/15/19.................................... 25,000 25,657 News America Corp. 7.750%, due 01/20/24.................................... 275,000 255,272 Structured Asset Securities Corp. 8.111%, due 04/25/27.................................... 139,060 141,076 The Money Store 94-A3 5.525%, due 09/15/18.................................... 96,545 93,723 Time Warner Entertainment, Inc. 9.150%, due 02/01/23.................................... 45,000 46,561 8.375%, due 03/15/23.................................... 50,000 48,555 ---------- 1,619,661 ---------- INTERNATIONAL DOLLAR BONDS -- 1.16% Korea Development Bank 6.500%, due 11/15/02.............. 100,000 95,923 Republic of South Africa 9.625%, due 12/15/99............ 125,000 130,469 Royal Bank of Scotland 7.375%, due 04/01/06.................................... 300,000 292,949 ---------- 519,341 ---------- U.S. GOVERNMENT AGENCIES -- 7.04% Federal Home Loan Mortgage Corp. 7.000%, due 04/15/07.................................... 187,253 179,510 5.800%, due 08/15/19.................................... 90,000 81,052 Federal Home Loan Mortgage Corp. Gold 8.000%, due 05/01/23.................................... 120,698 121,791 9.000%, due 05/01/24.................................... 357,779 375,532 9.500%, due 04/01/25.................................... 34,781 36,944 Federal National Mortgage Association 7.000%, due 03/01/03.................................... 35,000 34,869 6.240%, due 01/28/04.................................... 75,000 70,551 6.220%, due 03/13/06.................................... 150,000 141,635 6.700%, due 08/25/20.................................... 150,000 140,658 9.000%, due 08/01/21.................................... 34,254 35,958 8.500%, due 07/01/22.................................... 24,800 25,661 7.500%, due 05/01/25.................................... 407,838 402,609 6.500%, due 02/01/26.................................... 79,685 74,530 6.500%, due 03/01/26.................................... 500,000 467,653 7.000%, due 03/01/26.................................... 530,000 509,956 Government National Mortgage Association 7.500%, due 03/15/26.................................... 330,000 325,150 6.500%, due 03/20/26.................................... 69,697 64,491 Tennessee Valley Authority 6.875%, due 12/15/43.................................... 65,000 57,471 ---------- 3,146,021 ---------- U.S. GOVERNMENT OBLIGATIONS-- 10.51% U.S. Treasury Coupon Strips 0.000%, due 05/15/03.................................... 385,000 245,430 U.S. Treasury Notes and Bonds 5.500%, due 11/15/98.................................... 510,000 502,031 6.375%, due 03/31/01.................................... 1,535,000 1,527,804 5.750%, due 08/15/03.................................... 680,000 647,062 7.875%, due 11/15/04.................................... 155,000 166,625 6.500%, due 05/15/05.................................... 400,000 394,375 8.125%, due 05/15/21.................................... 610,000 687,203 U.S. Treasury Principal Strips 0.000%, due 05/15/05.................................... 505,000 278,063 0.000%, due 02/15/15.................................... 510,000 137,838 0.000%, due 11/15/15.................................... 445,000 113,680 ---------- 4,700,111 ---------- Total U.S. Bonds......................................... 9,985,134 ---------- NON-U.S. BONDS -- 68.33% AUSTRALIA -- 3.11% Government of Australia 8.550%, due 08/15/03................................ AUD 1,700,000 1,389,143 ---------- BELGIUM -- 3.16% Kingdom of Belgium 8.750%, due 06/25/02................................ BEF 14,000,000 507,959 9.000%, due 03/28/03.................................... 13,000,000 477,485 7.500%, due 07/29/08.................................... 13,000,000 429,476 ---------- 1,414,920 ---------- CANADA -- 5.58% British Columbia 7.250%, due 09/21/05................................ CAD 1,950,000 1,360,281 Government of Canada 4.250%, due 12/01/21.................................... 1,570,000 1,134,286 ---------- 2,494,567 ---------- DENMARK -- 6.15% City of Copenhagen 6.250%, due 03/15/01................................ DKK 2,400,000 413,797 Great Belt 7.000%, due 09/02/03.................................... 12,350,000 2,116,168 Kingdom of Denmark 7.000%, due 11/10/24.................................... 1,500,000 220,453 ---------- 2,750,418 ----------
- -------------------------------------------------------------------------------- 39 GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ------ ----- FRANCE -- 8.20% Eurofima 8.625%, due 09/01/99............................. FRF 5,100,000 $1,084,171 Government of France (OAT) 8.500%, due 12/26/12................................. 5,600,000 1,255,214 8.500%, due 04/25/23................................. 2,400,000 531,095 KFW International Finance 7.750%, due 02/17/98................................. 2,600,000 529,040 Kingdom of Finland 9.000%, due 08/13/03................................. 1,200,000 266,463 ---------- 3,665,983 ---------- GERMANY -- 14.30% Bundesrepublik Deutscheland 6.250%, due 01/04/24............................. DEM 950,000 548,929 Deutsche Bundesbahn 9.000%, due 12/01/00................................. 540,000 400,751 European Economic Community 6.500%, due 03/10/00................................. 2,650,000 1,808,915 Kingdom of Norway 6.125%, due 05/05/98................................. 1,040,000 705,473 LKB Baden-Wurt Finance 6.500%, due 09/15/08................................. 850,000 537,777 Republic of Finland 5.500%, due 02/05/03................................. 850,000 536,939 Republic of Ireland 7.250%, due 03/18/03................................. 2,700,000 1,858,124 ---------- 6,396,908 ---------- ITALY -- 7.26% Bayerische Landesbank 10.750%, due 03/01/03............................ ITL 1,000,000,000 706,970 Deutschebank 11.750%, due 02/23/98................................ 900,000,000 617,192 European Investment Bank 12.750%, due 02/15/00................................ 280,000,000 205,714 Landesbank Rheinland 8.250%, due 06/02/98................................. 750,000,000 486,513 LKB Baden-Wurt Finance 10.750%, due 04/14/03................................ 950,000,000 672,396 Nordic Investment Bank 10.800%, due 05/24/03................................ 600,000,000 425,160 Republic of Italy (BTP) 8.312%, due 02/01/01................................. 200,000,000 134,551 ---------- 3,248,496 ---------- JAPAN -- 5.70% Asian Development Bank 5.000%, 02/05/03................................. JPY 40,000,000 409,367 Government of Japan No.130 6.700%, due 06/20/00................................. 80,000,000 858,049 Government of Japan No.144 6.000%, due 12/20/01................................. 70,000,000 749,453 Republic of Italy 3.500%, due 06/20/01................................. 56,000,000 530,035 ---------- 2,546,904 ---------- NETHERLANDS -- 8.21% Government of Nederlands 7.500%, due 11/15/99...............................NLG 1,290,000 $ 816,217 8.250%, due 09/15/07.................................. 520,000 343,945 International Nederland Verzekeringen 6.250%, due 12/28/05.............................................. 1,800,000 1,020,271 Rabobank 6.750%, due 06/25/03.................................. 1,750,000 1,063,185 Republic of Austria 6.250%, due 02/28/24.................................. 825,000 427,942 ----------- 3,671,560 ----------- SPAIN -- 2.62% Government of Spain 10.100%, due 02/28/01..............................ESP 140,000,000 1,171,554 ----------- UNITED KINGDOM -- 4.04% Abbey National 8.750%, due 05/24/04...............................GBP 350,000 552,059 British Gas PLC 8.125%, due 03/31/03.................................. 545,000 837,403 UK Treasury 8.000%, due 06/10/03.................................. 80,000 126,651 8.000%, due 09/27/13.................................. 190,000 289,540 ----------- 1,805,653 ----------- Total Non-U.S. Bonds................................... 30,556,106 ----------- Total Bonds (Cost $40,050,938)......................... 40,541,240 ----------- Short-Term Investments-- 7.92% GOVERNMENT OBLIGATION -- 0.07% U.S. Treasury Bill 5.030%, due 11/14/96 $ 30,000 29,430 ----------- 29,430 ----------- COMMERCIAL PAPER -- 7.85% Baxter International, Inc. 5.550%, due 07/10/96.................................. 700,000 699,029 The Limited, Inc. 5.650%, due 07/01/96.................................. 1,051,000 1,051,000 Melville Corp. 5.663%, due 07/01/96.................................. 1,763,000 1,763,000 ----------- 3,513,029 ----------- Total Short-Term Investments (Cost $3,542,459)..................................... 3,542,459 ----------- Total Investments (Cost $43,593,397) -- 98.58% (a)...................... 44,083,699 ----------- Cash and other assets, less liabilities -- 1.42%............................. 635,306 ----------- Net Assets -- 100%..................................... $44,719,005 ===========
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 40 GLOBAL BOND FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a)Aggregate cost for federal income tax purposes was $43,593,397; and net unrealized appreciation consisted of: Gross unrealized appreciation.................................. $ 651,225 Gross unrealized depreciation.................................. (160,923) --------- Net unrealized appreciation................................. $ 490,302 =========
FRN: Floating rate note--The rate disclosed is that in effect at June 30, 1996. MTN: Medium term note FORWARD FOREIGN CURRENCY CONTRACTS (NOTE 4) The Global Bond Fund had the following open forward foreign currency contracts as of June 30, 1996:
SETTLEMENT LOCAL CURRENT UNREALIZED DATE CURRENCY VALUE GAIN/(LOSS) ---------- ------------- ---------- ---------- FORWARD FOREIGN CURRENCY BUY CONTRACTS British Pound........... 12/04/96 230,000 $ 357,095 $ 10,255 Italian Lira............ 12/04/96 1,560,000,000 999,373 13,715 FORWARD FOREIGN CURRENCY SALE CONTRACTS Australian Dollar....... 12/04/96 1,300,000 1,018,062 618 Belgian Franc........... 12/04/96 46,500,000 1,498,831 (15,577) Canadian Dollar......... 12/04/96 2,100,000 1,542,687 (8,608) Danish Kroner........... 12/04/96 16,600,000 2,850,791 (39,947) Dutch Guilder........... 12/04/96 6,400,000 3,792,178 (27,472) French Franc............ 12/04/96 19,400,000 3,795,695 (47,265) German Mark............. 12/04/96 10,200,000 6,766,006 (74,849) Japanese Yen............ 12/04/96 160,000,000 1,491,565 46,157 --------- $(142,973) =========
FUTURES CONTRACTS (NOTE 5) The Global Bond Fund had the following open futures contracts as of June 30, 1996:
SETTLEMENT CURRENT UNREALIZED DATE COST VALUE LOSS ---------- ---------- ---------- ---------- INTEREST RATE FUTURES BUY CONTRACTS 5 Year U.S. Treasury Note, 10 con- tracts............................ Sept 1996 $1,058,703 $1,057,500 $(1,203) 10 Year U.S. Treasury Note, 3 con- tracts............................ Sept 1996 322,687 322,500 (187) 30 Year U.S. Treasury Bond, 5 con- tracts............................ Sept 1996 548,125 547,656 (469) ------- $(1,859) =======
The market value of investments pledged to cover margin requirements for the open futures positions at June 30, 1996 was $29,430. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 41 GLOBAL BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1996 ASSETS: Investments, at value (Cost $43,593,397) (Note 1)................. $44,083,699 Cash.............................................................. 10,136 Foreign currency, at value (Cost $1,132,083)...................... 1,130,424 Receivables: Investment securities sold....................................... 479,285 Interest......................................................... 1,042,174 Variation margin (Note 5)........................................ 12,968 Other assets...................................................... 5,848 ----------- TOTAL ASSETS................................................... 46,764,534 ----------- LIABILITIES: Payables: Investment securities purchased.................................. 1,809,805 Net unrealized depreciation on forward foreign currency con- tracts.......................................................... 142,973 Investment advisory fees (Note 2)................................ 1,360 Accrued expenses................................................. 91,391 ----------- TOTAL LIABILITIES.............................................. 2,045,529 ----------- NET ASSETS......................................................... $44,719,005 =========== NET ASSETS CONSIST OF: Paid in capital (Note 7).......................................... $43,137,444 Accumulated undistributed net investment income................... 1,052,943 Accumulated net realized gain..................................... 198,256 Net unrealized appreciation....................................... 330,362 ----------- NET ASSETS..................................................... $44,719,005 =========== OFFERING PRICE PER SHARE: Brinson Class: Net asset value, offering price and redemption price per share (Based on net assets of $41,065,646 and 4,091,541 shares issued and outstanding) (Note 7)........................................ $ 10.04 =========== SwissKey Class: Net asset value, offering price and redemption price per share (Based on net assets of $3,653,359 and 364,428 shares issued and outstanding) (Note 7)............................................ $ 10.02 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 42 GLOBAL BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1996 INVESTMENT INCOME: Interest.......................................................... $2,733,764 ---------- TOTAL INCOME................................................... 2,733,764 ---------- EXPENSES: Advisory (Note 2)................................................. 310,066 Accounting........................................................ 102,901 Professional...................................................... 62,391 Transfer agent.................................................... 54,917 Registration...................................................... 47,245 Custodian......................................................... 32,416 Distribution (Note 6)............................................. 9,874 Other............................................................. 72,052 ---------- TOTAL EXPENSES................................................. 691,862 Expenses waived by Advisor (Note 2)............................ (309,908) ---------- NET EXPENSES................................................... 381,954 ---------- NET INVESTMENT INCOME.......................................... 2,351,810 ---------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments...................................................... 1,372,839 Futures contracts................................................ (11,267) Foreign currency transactions.................................... 2,661,334 ---------- Net realized gain............................................... 4,022,906 ---------- Change in net unrealized appreciation or depreciation on: Investments and foreign currency................................. (2,549,382) Forward contracts................................................ 596,085 Futures contracts................................................ (1,859) Translation of other assets and liabilities denominated in for- eign currency................................................... (37,388) ---------- Change in net unrealized appreciation or depreciation........... (1,992,544) ---------- Net realized and unrealized gain.................................. 2,030,362 ---------- Net increase in net assets resulting from operations.............. $4,382,172 ==========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 43 GLOBAL BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
YEAR YEAR ENDED ENDED JUNE JUNE 30, 30, 1996 1995 ----------- ----------- OPERATIONS: Net investment income............................... $ 2,351,810 $ 2,663,927 Net realized gain (loss)............................ 4,022,906 (467,411) Change in net unrealized appreciation or deprecia- tion .............................................. (1,992,544) 2,879,443 ----------- ----------- Net increase in net assets resulting from opera- tions.............................................. 4,382,172 5,075,959 ----------- ----------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income............ (3,447,154) (1,146,710) Distributions in excess of net investment income.... (1,534,232) -- Distributions from net realized gain................ (355,057) -- ----------- ----------- Total distributions to shareholders*................ (5,336,443) (1,146,710) ----------- ----------- CAPITAL SHARE TRANSACTIONS: Shares sold......................................... 14,584,928 15,734,111 Shares issued on reinvestment of distributions...... 3,954,345 824,053 Shares redeemed..................................... (24,728,515) (5,474,354) ----------- ----------- Net increase (decrease) in net assets resulting from capital share transactions (Note 7)................ (6,189,242) 11,083,810 ----------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS.......... (7,143,513) 15,013,059 ----------- ----------- NET ASSETS: Beginning of year................................... 51,862,518 36,849,459 ----------- ----------- End of year (including accumulated undistributed net investment income of $1,052,943 and $1,095,344, re- spectively)........................................ $44,719,005 $51,862,518 =========== =========== *DISTRIBUTIONS BY CLASS: Distributions from and in excess of net investment income Brinson Class...................................... (4,734,956) (1,146,710) SwissKey Class..................................... (246,430) -- Distributions from net realized gain Brinson Class...................................... (338,786) -- SwissKey Class..................................... (16,271) -- ----------- ----------- Total distributions to shareholders................. (5,336,443) (1,146,710) ----------- -----------
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 44 GLOBAL BOND FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
YEAR YEAR JULY 30, 1993* ENDED ENDED THROUGH BRINSON CLASS JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994 - ------------------------------------------------------------------------------- Net asset value, beginning of peri- od................................. $ 10.39 $ 9.55 $ 10.00 ------- ------- ------- Income (loss) from investment oper- ations: Net investment income ............ 0.84 0.50 0.45 Net realized and unrealized gain (loss)........................... 0.31 0.58 (0.52) ------- ------- ------- Total income (loss) from invest- ment operations................ 1.15 1.08 (0.07) ------- ------- ------- Less distributions: Distributions from and in excess of net investment income......... (1.40) (0.24) (0.28) Distributions from and in excess of net realized gain............. (0.10) -- (0.10) ------- ------- ------- Total distributions............. (1.50) (0.24) (0.38) ------- ------- ------- Net asset value, end of period...... $ 10.04 $ 10.39 $ 9.55 ======= ======= ======= Total return (non-annualized)....... 11.50% 11.34% (0.79%) Ratios/Supplemental data Net assets, end of period (in 000s)............................. $41,066 $51,863 $36,849 Ratio of expenses to average net assets: Before expense reimbursement...... 1.65% 1.43% 1.78%** After expense reimbursement....... 0.90% 0.90% 0.90%** Ratio of net investment income to average net assets: Before expense reimbursement...... 4.98% 5.53% 4.03%** After expense reimbursement....... 5.73% 6.06% 4.91%** Portfolio turnover rate............ 184% 199% 189%
* Commencement of investment operations ** Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 45 GLOBAL BOND FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout the period presented.
JULY 31, 1995* THROUGH SWISSKEY CLASS JUNE 30, 1996 - -------------------------------------------------------------------------------- Net asset value, beginning of period............................. $10.56 ------ Income from investment operations: Net investment income.......................................... 0.78 Net realized and unrealized gain............................... 0.15 ------ Total income from investment operations...................... 0.93 ------ Less distributions: Distributions from and in excess of net investment income...... (1.37) Distributions from net realized gain........................... (0.10) ------ Total distributions.......................................... (1.47) ------ Net asset value, end of period................................... $10.02 ====== Total return (non-annualized).................................... 9.17% Ratios/Supplemental data Net assets, end of period (in 000s)............................. $3,653 Ratio of expenses to average net assets: Before expense reimbursement................................... 2.14%** After expense reimbursement.................................... 1.39%** Ratio of net investment income to average net assets: Before expense reimbursement................................... 4.49%** After expense reimbursement.................................... 5.24%** Portfolio turnover rate......................................... 184%
* Commencement of SwissKey Class distribution ** Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 46 THE SWISSKEY FUNDS -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1.SIGNIFICANT ACCOUNTING POLICIES The Brinson Funds (the "Trust") is an open-end, management investment company registered under the Investment Company Act of 1940, as amended, as a series company. The Trust currently offers shares of seven series: Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund and Non-U.S. Equity Fund. Each Fund has two classes of shares outstanding, Brinson Class and SwissKey Class. There are an unlimited number of shares of each class with par value of $0.001 authorized. Each share represents an identical interest in the investments of the Funds and has the same rights. The Trust entered into an Agreement and Plan of Reorganization dated June 16, 1995 (the "Plan of Reorganization"), with SwissKey Funds. On July 28, 1995, pursuant to the Plan of Reorganization, the Trust acquired all of the net assets of the SBC World Growth Fund of the SwissKey Funds, which totalled $25,670,575 (including $3,848,285 of net unrealized appreciation) in exchange solely for 2,474,177 SwissKey Fund shares of the Trust's Global Equity Fund. The SwissKey Fund shares were then distributed to shareholders of the SBC World Growth Fund according to their respective interests, and the SBC World Growth Fund was dissolved. The total net assets of the Global Equity Fund were $47,088,147 immediately after the acquisition. The following is a summary of significant accounting policies consistently followed by the Global Fund, Global Equity Fund and Global Bond Fund (each a "Fund," collectively the "Funds") in the preparation of their financial statements. A.INVESTMENT VALUATION: Securities for which quotations are readily available are valued at the last available sales price on the exchange or market on which they are principally traded, or lacking any sales, at the last available bid price on the exchange or market on which such securities are principally traded. Securities for which market quotations are not readily available, including restricted securities which are subject to limitations on their sale, are valued at fair value as determined in good faith by or under the direction of the Trust's Board of Trustees. Investments in affiliated investment companies are valued each day based on the closing net asset value of the fund. Fixed income/debt securities are valued by using market quotations or independent services that use prices provided by market makers or estimates of market values obtained from yield data relating to instruments or securities with similar characteristics. Futures contracts are valued at the settlement price established each day on the exchange on which they are traded. Forward contracts are valued daily using quoted forward exchange rates. Short-term obligations with a maturity of 60 days or less are valued at amortized cost, which approximates market value. B.FOREIGN CURRENCY TRANSLATION: Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the mean between the bid and offered quotations of such currencies against the U.S. dollar as of the date of valuation. Purchases and sales of portfolio securities, commitments under forward foreign currency contracts, income receipts and expense accruals are translated at the prevailing exchange rate on the date of each transaction. Realized and unrealized foreign exchange gains or losses on investments are included as a component of net realized and unrealized gain or loss in the statement of operations. C.INVESTMENT TRANSACTIONS: Investment transactions are accounted for on a trade date basis. Gains and losses on securities sold are determined on an identified cost basis. D.INVESTMENT INCOME: Interest income, which includes the amortization of premiums and discounts, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date, except that certain dividends from foreign securities are recorded as the information becomes available. E.FEDERAL INCOME TAXES: It is the policy of the Funds to comply with all requirements of the Internal Revenue Code (the "Code") applicable to regulated investment companies and to distribute substantially all of their taxable income to their shareholders. The Funds have met the requirements of the Code applicable to regulated investment companies for the year ended June 30, 1996. Therefore, no federal income tax provision was required. - -------------------------------------------------------------------------------- 47 THE SWISSKEY FUNDS -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- F.DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of the Funds to distribute their respective net investment income on a semi-annual basis and net capital gains, if any, annually. Distributions to shareholders are recorded on the ex- dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. These differences are primarily due to differing treatments for foreign currency transactions. Differences in dividends per share between the classes are due to distribution expenses. Amounts equal to 7.28% and 14.67% of the amount taxable as ordinary income qualify for the dividends received deduction available to corporate shareholders for the Global Fund and the Global Equity Fund, respectively. G.INCOME AND EXPENSE ALLOCATION: All income earned and expenses incurred by the Fund will be borne on a pro rata basis by each of the classes, except that the Brinson Class shares will not incur any of the distribution expenses. H.USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. 2.INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES Brinson Partners, Inc. (the "Advisor"), a registered investment advisor, provides the Funds with investment management services. As compensation for these services, the Funds pay the Advisor a monthly fee based on each Fund's respective average daily net assets. The Advisor has agreed to waive its fees and reimburse each Fund to the extent total annualized expenses exceed a specified percentage of each Fund's respective average daily net assets. Investment advisory fees and other transactions with affiliates, for the year ended June 30, 1996, were as follows:
FEES ADVISORY BRINSON CLASS SWISSKEY CLASS ADVISORY WAIVED AND/OR FEE EXPENSE CAP EXPENSE CAP FEES REIMBURSED -------- ------------- -------------- ---------- ------------- Global Fund............. 0.80% 1.10% 1.75% $3,415,057 $ -- Global Equity Fund...... 0.80 1.00 1.76 390,824 378,626 Global Bond Fund........ 0.75 0.90 1.39 310,066 309,908
Certain officers of the Funds are also officers and directors of the Advisor. All officers serve without direct compensation from the Funds. Trustees' fees paid to unaffiliated trustees were $11,404, $4,361 and $4,429 for the Global Fund, Global Equity Fund and Global Bond Fund, respectively. At June 30, 1996, the Global Fund was invested in shares of certain affiliated investment companies also sponsored by Brinson Partners, Inc. These investments are listed in the schedule of investments and represent 9.13% of the Fund's total net assets. At June 30, 1996, net unrealized appreciation on these investments was $71,309. 3.INVESTMENT TRANSACTIONS Investment transactions for the year ended June 30, 1996, excluding short-term investments, were as follows:
PROCEEDS PURCHASES FROM SALES ------------ ------------ Global Fund........................................... $713,034,559 $608,243,355 Global Equity Fund.................................... 57,828,955 34,016,248 Global Bond Fund...................................... 71,111,891 74,477,691
- -------------------------------------------------------------------------------- 48 THE SWISSKEY FUNDS -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 4.FORWARD FOREIGN CURRENCY CONTRACTS The Funds engage in portfolio hedging with respect to changes in currency exchange rates by entering into forward foreign currency contracts to purchase or sell currencies. Forward foreign currency contracts are also used to achieve currency allocation strategies. A forward foreign currency contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. Risks associated with such contracts include movement in the value of the foreign currency relative to the U.S. dollar and the ability of the counterparty to perform. The unrealized gain, if any, represents the credit risk to the Fund on a forward foreign currency contract. Fluctuations in the value of forward foreign currency contracts are recorded daily as net unrealized gains or losses. The Funds realize a gain or loss upon settlement of the contracts. The statement of operations reflects net realized and net unrealized gains and losses on these contracts. The counterparty to all forward foreign currency contracts, at and for the year ended June 30, 1996, was the Funds' custodian. 5.FUTURES CONTRACTS The Funds may purchase or sell exchange-traded futures contracts, which are contracts that obligate the Funds to make or take delivery of a financial instrument or the cash value of a securities index at a specified future date at a specified price. The Funds enter into such contracts to hedge a portion of their portfolio. Risks of entering into futures contracts include the possibility that there may be an illiquid market or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Funds are required to deposit either cash or securities (initial margin). Subsequent payments (variation margin) are made or received by the Funds, generally on a daily basis. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains or losses. The Funds recognize a realized gain or loss when the contract is closed or expires. The statement of operations reflects net realized and net unrealized gains and losses on these contracts. 6.DISTRIBUTION PLAN The Trust has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940. The Plan governs payments made for the expenses incurred in the promotion and distribution of the SwissKey Class of shares. Annual fees under the Plan, which include a 0.25% service fee, total 0.65%, 0.76% and 0.49% of the average daily net assets of the SwissKey Class of the Global Fund, Global Equity Fund and Global Bond Fund, respectively. 7.CAPITAL TRANSACTIONS Capital stock transactions were as follows:
GLOBAL FUND ---------------------------------------------- YEAR ENDED YEAR ENDED JUNE 30, 1996 JUNE 30, 1995 ---------------------- ----------------------- SHARES VALUE SHARES VALUE --------- ------------ ---------- ------------ Sales: Brinson Class.................. 7,972,013 $ 95,544,500 11,726,672 $124,484,442 SwissKey Class................. 1,155,619 13,939,062 -- -- --------- ------------ ---------- ------------ Total Sales................. 9,127,632 $109,483,562 11,726,672 $124,484,442 ========= ============ ========== ============ Dividend Reinvestment: Brinson Class.................. 2,632,284 $ 30,918,724 960,415 $ 10,276,565 SwissKey Class................. 20,488 243,591 -- -- --------- ------------ ---------- ------------ Total Dividend Reinvestment. 2,652,772 $ 31,162,315 960,415 $ 10,276,565 ========= ============ ========== ============ Redemptions: Brinson Class.................. 5,330,521 $ 63,966,318 7,205,445 $ 77,406,972 SwissKey Class................. 24,583 296,145 -- -- --------- ------------ ---------- ------------ Total Redemptions........... 5,355,104 $ 64,262,463 7,205,445 $ 77,406,972 ========= ============ ========== ============
- -------------------------------------------------------------------------------- 49 THE SWISSKEY FUNDS -- NOTES TO FINANCIAL STATEMENTS - --------------------------------------------------------------------------------
GLOBAL EQUITY FUND ------------------------------------------- YEAR ENDED YEAR ENDED JUNE 30, 1996 JUNE 30, 1995 --------------------- --------------------- SHARES VALUE SHARES VALUE --------- ----------- --------- ----------- Sales: Brinson Class.................... 285,419 $ 3,205,567 13,700 $ 133,064 SwissKey Class................... 746,285 8,357,646 -- -- --------- ----------- --------- ----------- Total Sales................... 1,031,704 $11,563,213 13,700 $ 133,064 ========= =========== ========= =========== Shares issued in acquisition of SBC World Growth Fund: Brinson Class.................... -- -- -- -- SwissKey Class................... 2,474,177 $25,670,575 -- -- --------- ----------- --------- ----------- Total......................... 2,474,177 $25,670,575 -- -- ========= =========== ========= =========== Dividend Reinvestment: Brinson Class.................... 160,063 $ 1,694,631 28,495 $ 271,028 SwissKey Class................... 155,720 1,641,689 -- -- --------- ----------- --------- ----------- Total Dividend Reinvestment... 315,783 $ 3,336,320 28,495 $ 271,028 ========= =========== ========= =========== Redemptions: Brinson Class.................... 186,600 $ 2,055,092 131,587 $ 1,262,526 SwissKey Class................... 523,404 5,704,953 -- -- --------- ----------- --------- ----------- Total Redemptions............. 710,004 $ 7,760,045 131,587 $ 1,262,526 ========= =========== ========= =========== GLOBAL BOND FUND ------------------------------------------- YEAR ENDED YEAR ENDED JUNE 30, 1996 JUNE 30, 1995 --------------------- --------------------- SHARES VALUE SHARES VALUE --------- ----------- --------- ----------- Sales: Brinson Class.................... 1,094,889 $10,985,420 1,615,817 $15,734,111 SwissKey Class................... 345,211 3,599,508 -- -- --------- ----------- --------- ----------- Total Sales................... 1,440,100 $14,584,928 1,615,817 $15,734,111 ========= =========== ========= =========== Dividend Reinvestment: Brinson Class.................... 374,786 $ 3,722,031 80,422 $ 824,053 SwissKey Class................... 23,414 232,314 -- -- --------- ----------- --------- ----------- Total Dividend Reinvestment... 398,200 $ 3,954,345 80,422 $ 824,053 ========= =========== ========= =========== Redemptions: Brinson Class.................... 2,369,683 $24,686,522 564,413 $ 5,474,354 SwissKey Class................... 4,197 41,993 -- -- --------- ----------- --------- ----------- Total Redemptions............. 2,373,880 $24,728,515 564,413 $ 5,474,354 ========= =========== ========= ===========
- -------------------------------------------------------------------------------- 50 REPORT OF INDEPENDENT AUDITORS - -------------------------------------------------------------------------------- The Board of Trustees and Shareholders The Brinson Funds -- Global Fund Global Equity Fund Global Bond Fund We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of The Brinson Funds -- Global Fund, Global Equity Fund, and Global Bond Fund as of June 30, 1996, the related statements of operations for the year then ended and changes in net assets and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmations of securities owned as of June 30, 1996, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The Brinson Funds -- Global Fund, Global Equity Fund and Global Bond Fund at June 30, 1996, the results of their operations for the year then ended and the changes in their net assets and the financial highlights for the periods indicated therein, in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP Ernst & Young LLP Chicago, Illinois August 9, 1996 - -------------------------------------------------------------------------------- 51 SPECIAL MEETING OF SHAREHOLDERS - -------------------------------------------------------------------------------- A Special Meeting of Shareholders was held on February 16, 1996. At the meeting, shareholders of the Funds were asked to consider and act upon amendments to the Trust's fundamental investment policies to (1) permit each Fund to invest in affiliated investment companies; and (2) permit each Fund to enter into forward foreign currency transactions for non-hedging purposes. In addition, shareholders of the Global Fund and Global Bond Fund were asked to consider and act upon an amendment to the Trust's fundamental investment policies to increase the limitation on permissible loans of portfolio securities from 25% to 33 1/3% of its assets. The results of all matters voted on by shareholders of the Funds at the Special Meeting held on February 16, 1996 were as follows: A.AMENDMENT TO THE TRUST'S FUNDAMENTAL INVESTMENT POLICIES TO PERMIT EACH FUND TO INVEST IN AFFILIATED INVESTMENT COMPANIES:
For Against Abstain ---------- --------- ------- Global Fund........................................ 20,933,211 3,029,356 496,583 Global Equity Fund................................. 2,476,475 17,186 30,717 Global Bond Fund................................... 2,114,717 -0- -0-
B.AMENDMENT TO THE TRUST'S FUNDAMENTAL INVESTMENT POLICIES TO PERMIT EACH FUND TO ENTER INTO FORWARD FOREIGN CURRENCY TRANSACTIONS FOR NON-HEDGING PURPOSES:
For Against Abstain ---------- --------- ------- Global Fund........................................ 18,496,343 5,463,419 499,388 Global Equity Fund................................. 2,451,785 32,234 40,359 Global Bond Fund................................... 1,645,298 2,405 467,014
C.THE RESULTS OF THE ADDITIONAL MATTER VOTED ON BY SHAREHOLDERS OF THE GLOBAL FUND AND GLOBAL BOND FUND AT THE SPECIAL MEETING HELD ON FEBRUARY 16, 1996 WERE AS FOLLOWS:
For Against Abstain ---------- --------- --------- Global Fund...................................... 16,589,743 5,914,892 1,954,515 Global Bond Fund................................. 1,647,702 -0- 467,015
- -------------------------------------------------------------------------------- 52 - -------------------------------------------------------------------------------- DISTRIBUTED BY: FUND/PLAN BROKER SERVICES, INC. 2 W. ELM STREET CONSHOHOCKEN, PA 19428 This report is submitted for the general information of the shareholders of the Funds. It is not authorized for distribution to prospective investors in the Funds unless preceded or accompanied by an effective Prospectus which includes details regarding the Funds' objectives, policies, expenses and other information. - -------------------------------------------------------------------------------- LOGO 10 East 50th Street . New York, New York 10022 . Tel: (800) SWISSKEY [LOGO OF SWISSKEY FUNDS] SWISSKEY U.S. BALANCED FUND SWISSKEY U.S. EQUITY FUND SWISSKEY U.S. BOND FUND ANNUAL REPORT JUNE 30, 1996 Your Key to Performance ----------------------------- TRUSTEES AND OFFICERS - -------------------------------------------------------------------------------- LOGO TRUSTEES Walter E. Auch Frank K. Reilly, CFA Edward M. Roob OFFICERS Frank K. Reilly, CFA Carolyn M. Burke, CPA Chairman of the Board Assistant Secretary E. Thomas McFarlan Catherine E. Macrae President and Treasurer Assistant Secretary Thomas J. Digenan, CPA Debra L. Nichols Assistant Treasurer Assistant Secretary Bruce G. Leto Secretary ------------------------------------------------------------ 1 THE FUNDS' ADVISOR -- BRINSON PARTNERS, INC. - -------------------------------------------------------------------------------- LOGO Brinson Partners, Inc. is an institutional investment management firm structured around teams of investment specialists covering major world asset classes. We specialize in managing multiple asset portfolios that provide clients with the opportunity to participate in all major world asset classes. It is important that investment decisions, whether they pertain to a global portfolio or a single asset class portfolio, be made within the context of a global capital market perspective. Our coordinated application of investment strategies distinguishes Brinson Partners, Inc. as a leader in global investment management of institutional assets. We firmly believe that asset allocation is portfolio management at its highest and most important level. Performance is maximized through a comprehensive understanding of global investment markets and their interrelationships. Portfolio structure is tailored to specific client objectives and focused upon both risk and return considerations in the context of full long-term investment cycles. At Brinson Partners, Inc., our investment decisions are based on fundamental research, internally developed valuation systems and seasoned judgment. Our independent team approach allows for rapid responses to market changes, while providing each client with the benefit of our best talent and the flexibility to customize portfolios to meet unique requirements. ------------------------------------------------------------ 2 TABLE OF CONTENTS - -------------------------------------------------------------------------------- LOGO Shareholder Letter........................................................... 4 U.S. Economic and Market Highlights.......................................... 5 U.S. Balanced Fund........................................................... 6 Schedule of Investments..................................................... 9 Financial Statements........................................................ 12 Financial Highlights........................................................ 15 U.S. Equity Fund............................................................. 17 Schedule of Investments..................................................... 20 Financial Statements........................................................ 22 Financial Highlights........................................................ 25 U.S. Bond Fund............................................................... 27 Schedule of Investments..................................................... 29 Financial Statements........................................................ 30 Financial Highlights........................................................ 33 The SwissKey Funds--Notes to Financial Statements............................ 35 Report of Independent Auditors............................................... 38 Special Meeting of Shareholders.............................................. 39 ------------------------------------------------------------ 3 SHAREHOLDER LETTER - -------------------------------------------------------------------------------- LOGO August 19, 1996 Dear Shareholder: We appreciate the confidence you have placed in us and are pleased to present you with the June 30, 1996 Annual Report for the U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond Fund. The SwissKey Funds provide you with the opportunity to invest in a diversified family of mutual funds. One of the many benefits offered by these funds is management by Brinson Partners, Inc., the worldwide portfolio manager of Swiss Bank Corporation. Another benefit is the fact that you do not incur a sales charge upon purchasing or redeeming shares so your full investment works for you. We also offer toll-free access to investment information and free transfer of investments between funds. U.S. Balanced Fund For the period from July 31, 1995 to June 30, 1996, the Fund has provided an unannualized total return of 11.54%. In the first half of 1996, the Fund returned 2.89%. The Fund's market allocation has been characterized by an underweight in the U.S. equity market and an overweight to the U.S. bond market where return and risk characteristics are presently more attractive. U.S. Equity Fund For the period from July 31, 1995 to June 30, 1996, the Fund provided an unannualized total return of 25.70%. The Fund returned 10.90% in the first half of 1996. Fund strategy presently maintains a modest overweight in stocks with high book- to-price, earnings variability and financial leverage characteristics. In addition, the Fund is underweighted the foreign earnings exposure embedded in U.S. corporate earnings, particularly relative to the S&P 500. Current industry positions include relative overweights in capital goods, banks, transportation, insurance and autos/durables issues. The Fund remains underweighted in technology, utility, consumer non-durable and retail/apparel stocks. U.S. Bond Fund For the period from August 31, 1995 to June 30, 1996, the Fund returned 3.24%. In the first half of 1996, the Fund returned -1.94%. The strategic duration of the U.S. Bond Fund was lengthened from 1.20 to 1.25 times benchmark duration in late July. Since early March, intermediate and long-term U.S. interest rates have risen an additional fifty basis points. Market yields are now about 100 basis points above our equilibrium estimates. The increase in market yields reflected the worries of many bond market investors that stronger U.S. macroeconomic activity, tighter labor markets and higher inflation would lead to Federal Reserve tightening. We believe these risks are diminishing and that U.S. economic growth will slow in the second half of 1996 thus producing a more favorable environment for exposure to U.S. interest rates. We look forward to the challenges ahead and, as always, welcome your comments and suggestions. Sincerely, /s/ Raoul Weil /s/ Raymond Simon Raoul Weil Raymond Simon Executive Director Executive Director Private Investors & Private Investors & Asset Management Asset Management ------------------------------------------------------------ 4 U.S. ECONOMIC AND MARKET HIGHLIGHTS - -------------------------------------------------------------------------------- LOGO Most indications point to continued modest growth this year, although with typical fluctuations. Recently, real GDP has grown at a rate well above market expectations, and recent employment data have also been stronger than expected. This has led to weakness in the bond market, despite little evidence for a causal link from employment to inflation. After showing relatively strong price pressure in the first four months of the year from increases in food and energy prices, the May and June CPI reports showed a slackening of inflationary pressure. Looking forward, temporary supply-demand imbalances should have no long-term impact on inflation. Fiscal policy issues, including the federal budget deficit, have effectively been put on hold during the run-up to the election. Despite the political posturing, continued reduction in the deficit is likely to persist in the long run. This is exemplified by the Administration's latest estimate of the current year's deficit: $117 billion, down from the March estimate of $146 billion. U.S. ENVIRONMENT MAJOR MARKETS Six Months Ended June 30, 1996 Total Return [CHART APPEARS HERE] U.S. Cash Equivalents 2.53 U.S. Bonds -1.25 U.S. Equities 10.27 SALOMON U.S. TREASURY BENCHMARK RETURNS Six Months Ended June 30, 1996 Total Return [CHART APPEARS HERE] Maturity (Years) 1 2.41 2 1.16 3 0.29 5 -1.76 10 -5.01 30 -9.34 TOP TEN INDUSTRY RETURNS RELATIVE TO S&P 500 Six Months Ended June 30, 1996 1. Oil Services 2. Cosmetics 3. Leisure, Luxury 4. Real Property 5. Retail (Other) 6. Apparel, Textiles 7. Motor Vehicles 8. Misc. Finance 9. Business Machines 10. Beverages Source: BARRA BOTTOM TEN INDUSTRY RETURNS RELATIVE TO S&P 500 Six Months Ended June 30, 1996 1. Electric Utilities 2. Liquor 3. Paper 4. Telephone, Telegraph 5. Aluminum 6. Other Insurance 7. Foreign Petroleum 8. Trucking, Freight 9. Iron & Steel 10. Coal & Uranium Source: BARRA ------------------------------------------------------------- 5 U.S. BALANCED FUND - -------------------------------------------------------------------------------- LOGO The U.S. Balanced Fund is an actively managed, diversified portfolio that provides integrated asset management across and within U.S. stocks, bonds and cash. The investment process is strategic in nature and is driven by deviations of market price from fundamental value. We believe this philosophy offers the greatest potential for achieving enhanced long-term returns, while controlling risk. The SwissKey U.S. Balanced Fund has provided an unannualized return of 11.54% since its inception on July 31, 1995. This compares with the corresponding 15.44% return of its benchmark, the U.S. Balanced Mutual Fund Index. In the first half of 1996, the Fund returned 2.89% while the benchmark returned 6.14%. The primary positive contributor to performance in the first half of 1996 was security selection within the equity component of the Fund. However, this was not large enough to overcome the negative impact of the underweight in equities and overweight in bonds. In the first six months of 1996, the bond market suffered losses, with the Salomon BIG Index showing a decline of 1.25%. Stronger than expected economic news and resurgent inflation fears caused an increase in volatility and resulted in yields moving back up. Equities were not adversely affected in the first half, as the Wilshire 5000 Index posted a 10.27% gain. Strategy within the Fund continues to focus on reducing the risk in the overpriced equity market. The increased level of the equity market drove prices to levels well in excess of fundamental value. The market had yet to reflect the less robust quarterly earnings comparisons that are now starting to emerge. Strategy within the equity portion of the Fund reflects an underweight in exposure to companies with foreign earnings, consistent with an underpriced U.S. dollar. The rise in yields in the first half of the year caused bonds to become more attractive, with yields in excess of those required as compensation for the risk of owning bonds. Our outlook is for inflation to remain relatively benign, which should produce attractive real returns for bondholders. Within the bond segment of the Fund, higher duration bonds are overweighted as the intermediate and long segments of the yield curve are more attractive than the short end. ------------------------------------------------------------ 6 U.S. BALANCED FUND - -------------------------------------------------------------------------------- LOGO TOTAL RETURN
6 months ended Since 6/30/96 inception* - ------------------------------------------------------ SWISSKEY U.S. BALANCED FUND 2.89% 11.54% - ------------------------------------------------------ U.S. Balanced Mutual Fund Index** 6.14 15.44 - ------------------------------------------------------
*Inception date of the SwissKey U.S. Balanced Fund is July 31, 1995. **An un-managed index compiled by the Advisor, constructed as follows: 65% Wilshire 5000 Index and 35% Salomon Brothers Broad Investment Grade Bond Index. Total return includes reinvestment of all capital gain and income distributions. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $10,000 This chart shows the growth adjustment has been made for in the value of an any income investment in the SwissKey taxes payable by U.S. Balanced Fund and the shareholders on income U.S. Balanced Mutual Fund dividends and capital gain Index if you had invested distributions. Past $10,000 on July 31, 1995, performance is no guarantee and had reinvested all your of future results. Share income dividends and capital price and return will vary gain distributions through with market conditions; June 30, 1996. No investors may realize a gain or loss upon redemption. SWISSKEY U.S. BALANCED FUND VS. U.S. BALANCED MUTUAL FUND INDEX Wealth Value with Dividends Reinvested [CHART APPEARS HERE] 7/31/95 6/30/96 ------- ------- SwissKey U.S. Balanced Fund $10,000 $11,544 U.S. Balanced Mutual Fund Index $10,000 $11,154 Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. ------------------------------------------------------------ 7 U.S. BALANCED FUND - -------------------------------------------------------------------------------- LOGO INDUSTRY DIVERSIFICATION As a Percent of Net Assets As of June 30, 1996 - ------------------------------------------------------------------------------- U.S. EQUITIES Basic Industries Chemicals.............................................................. 0.34% Housing/Paper.......................................................... 1.55 Metals................................................................. 0.15 ----- 2.04 Capital Investment Capital Goods.......................................................... 3.87 Technology............................................................. 1.74 ----- 5.61 Consumer Autos/Durables......................................................... 0.44 Discretionary.......................................................... 3.07 Health: Drugs.......................................................... 3.17 Health: Non-Drugs...................................................... 1.60 Non-Durables........................................................... 4.55 Retail/Apparel......................................................... 1.87 ----- 14.70 Energy.................................................................. 2.24 Financial Banks.................................................................. 4.74 Non-Banks.............................................................. 4.27 ----- 9.01
Services................................................................ 2.78% Transportation.......................................................... 2.09 Utilities............................................................... 1.70 Miscellaneous........................................................... 1.18 ------ Total U.S. Equities.................................................. 41.35* ------ U.S. BONDS Corporate Bonds Asset-Backed........................................................... 1.83 CMO.................................................................... 0.53 Consumer............................................................... 1.32 Financial.............................................................. 2.22 Industrial............................................................. 0.52 Telecommunications..................................................... 0.69 ------ 7.11 International Dollar Bonds.............................................. 4.03 U.S. Government Agencies................................................ 17.87 U.S. Government Obligations............................................. 26.73 ------ Total U.S. Bonds..................................................... 55.74* ------ SHORT-TERM INVESTMENTS.................................................. 6.76* ------ TOTAL INVESTMENTS.................................................... 103.85 LIABILITIES, LESS CASH AND OTHER ASSETS.................................................. (3.85) ------ NET ASSETS.............................................................. 100.00% ======
*The Fund held a long position in U.S. Treasury futures on June 30, 1996 which increased U.S. bond exposure from 55.74% to 59.30%. The Fund also held a short position in stock index futures which reduced U.S. equity exposure from 41.35% to 34.54%. These two adjustments result in a net increase in the Fund's exposure to Short-Term Investments from 6.76% to 10.01%. ASSET ALLOCATION As of June 30, 1996
CURRENT BENCHMARK STRATEGY - ------------------------------------ U.S. Equity 65% 35% U.S. Bonds 35 60 Cash Equivalents 0 5 - ------------------------------------ 100% 100%
TOP TEN U.S. EQUITY HOLDINGS As of June 30, 1996
PERCENT OF NET ASSETS - -------------------------------------------- 1. Citicorp 2.16% 2. Lockheed Martin Corp. 2.11 3. Chase Manhattan Corp. 1.80 4. Burlington Northern Santa Fe 1.64 5. Enron Corp. 1.60 6. Avon Products, Inc. 1.44 7. Schering Plough Corp. 1.31 8. Kimberly-Clark Corp. 1.25 9. Mattel, Inc. 1.18 10. Aon Corp. 1.12 - --------------------------------------------
------------------------------------------------------------ - --------------- 8 U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - --------------------------------------------------------------------------------
SHARES VALUE ------- ------------ U.S. Equities -- 41.35% Aetna Life & Casualty Co................................... 24,900 $ 1,780,350 Allergan, Inc.............................................. 41,500 1,628,875 Allstate Corp.............................................. 23,600 1,076,750 Alza Corp. (b)............................................. 40,500 1,108,688 American Mobile Satellite Corp., Inc. (b).................. 4,300 66,650 Aon Corp................................................... 50,500 2,562,875 Automatic Data Processing, Inc............................. 47,400 1,830,825 Avon Products, Inc......................................... 72,800 3,285,100 Bard (C.R.), Inc........................................... 25,100 853,400 Beckman Instruments, Inc................................... 16,200 615,600 Biogen, Inc. (b)........................................... 3,800 208,525 Birmingham Steel Corp...................................... 16,300 266,913 Boeing Co.................................................. 10,700 932,238 Boston Technology, Inc. (b)................................ 16,200 273,375 Brinker International, Inc. (b)............................ 11,700 175,500 Burlington Northern Santa Fe............................... 46,300 3,744,513 Centerior Energy Co........................................ 34,000 250,750 Chase Manhattan Corp....................................... 58,400 4,124,500 CIGNA Corp................................................. 20,100 2,369,288 Citicorp................................................... 59,900 4,949,237 CMS Energy Corp............................................ 44,200 1,364,675 Coca Cola Enterprises, Inc................................. 38,800 1,343,450 Comerica, Inc.............................................. 11,100 495,337 Comverse Technology, Inc. (b).............................. 12,400 378,200 Cooper Cameron Corp. (b)................................... 5,730 250,687 Corning, Inc............................................... 63,200 2,425,300 Dial Corp.................................................. 33,100 947,488 EMC Corp./Mass (b)......................................... 46,000 856,750 Enron Corp................................................. 89,300 3,650,138 Entergy Corp............................................... 12,300 349,012 Federal Express Corp. (b).................................. 4,800 393,600 Federated Department Stores (b)............................ 43,100 1,470,787 FileNet Corp. (b).......................................... 6,200 226,300 First Data Corp............................................ 12,129 965,772 Food Lion, Inc. Class A.................................... 57,500 456,406 Ford Motor Co.............................................. 40,800 1,320,900 Forest Laboratories, Inc. (b).............................. 27,500 1,062,187 Gannett Co., Inc........................................... 27,000 1,910,250 General Instrument Corp. (b)............................... 64,600 1,865,325 Genzyme Corp. (b).......................................... 5,300 266,325 Goodyear Tire & Rubber Co.................................. 48,500 2,340,125 Health Care and Retirement Corp. (b)....................... 21,750 516,563 Honeywell, Inc............................................. 32,700 1,782,150 Inland Steel Industries, Inc............................... 10,400 204,100 Interpublic Group of Companies, Inc........................ 20,100 942,187 James River Corp. of Virginia.............................. 23,300 614,537 Kimberly-Clark Corp........................................ 37,000 2,858,250 Kroger Co. (b)............................................. 17,000 671,500 Lockheed Martin Corp....................................... 57,300 4,813,200 Lyondell Petrochemical Co.................................. 44,300 1,068,737 Magna Group, Inc........................................... 7,200 172,800 Manor Care, Inc............................................ 26,500 1,043,437 Mattel, Inc................................................ 94,250 2,697,906
SHARES VALUE ---------- ------------ Melville Corp.......................................... 55,000 $ 2,227,500 Nabisco Holdings Corp. Class A......................... 5,200 183,950 National Semiconductor Corp. (b)....................... 47,200 731,600 Nextel Communications, Inc. Class A (b)................ 40,700 775,844 Old Republic International Corp........................ 23,450 507,106 Owens Illinois, Inc. (b)............................... 36,200 579,200 Pentair, Inc........................................... 19,000 570,000 Pfizer, Inc............................................ 2,700 192,713 Philip Morris Companies, Inc........................... 8,600 894,400 RJR Nabisco Convertible Preferred "C".................. 131,600 855,400 RJR Nabisco Holdings Corp.............................. 13,040 404,240 Schering Plough Corp................................... 47,700 2,993,175 Seagate Technology, Inc. (b)........................... 12,600 567,000 Sprint Corp............................................ 31,600 1,327,200 State Street Boston Corp............................... 9,600 489,600 Timken Co.............................................. 11,300 437,875 Transamerica Corp...................................... 11,300 923,775 Tyson Foods, Inc. Class A.............................. 33,600 919,800 Ultramar Corp.......................................... 17,700 513,300 US Bancorp............................................. 27,600 997,050 USF&G Corp............................................. 36,700 600,963 Westvaco Corp.......................................... 9,650 288,294 Whitman Corp........................................... 17,000 410,125 WMX Technologies, Inc.................................. 51,400 1,683,350 York International Corp................................ 5,600 289,800 360 Communications Co. (b)............................. 14,100 338,400 ------------ Total U.S. Equities (Cost $77,173,388)................. 94,529,993 ------------ FACE AMOUNT VALUE ---------- ------------ Bonds -- 55.74% U.S. CORPORATE BONDS -- 7.11% American Express Credit Account Master Trust 96-1A 6.800%, due 12/15/03.................................. $1,280,000 $ 1,285,504 Bell South Corp. 0.000%, due 12/15/15.................. 3,175,000 635,010 Chrysler Financial Corp. MTN 6.500%, due 08/21/97...... 1,000,000 1,002,990 Dayton Hudson Credit Card 95-1 6.100%, due 09/25/98.... 2,000,000 1,990,960 Ford Motor Credit Corp. MTN 5.370%, due 09/08/98....... 945,000 922,462 GE Capital Mtg. Services, Inc. 94-10A 6.500%, due 03/25/24.............................................. 1,512,666 1,204,566 GMAC MTN 6.750%, due 06/10/02.......................... 1,000,000 983,670 Grace W.R. & Co. 8.000%, due 08/15/04.................. 1,150,000 1,195,000 Nationwide CSN Trust 9.875%, due 02/15/25.............. 1,000,000 1,099,173 News America Corp. 7.750%, due 01/20/24................ 1,000,000 928,262 Standard Credit Card Trust 94-1A 4.650%, due 02/07/97.. 2,000,000 1,985,140 TCI Communication 6.820%, due 09/15/10................. 2,100,000 2,092,119
- -------------------------------------------------------------------------------- 9 U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ---------- ----------- Time Warner Entertainment, Inc. 9.150%, due 02/01/23................................... $ 430,000 $ 444,916 8.375%, due 03/15/23................................... 500,000 485,548 ----------- 16,255,320 ----------- INTERNATIONAL DOLLAR BONDS--4.03% Bangkok Bank Public Co. Ltd. 7.250%, due 09/15/05....... 2,100,000 2,028,810 Hanson PLC Notes 6.750%, due 09/15/05................... 1,000,000 958,955 International Bank for Reconstruction & Development 6.375%, due 07/21/05................................... 1,500,000 1,439,499 Petroliam Nasional 7.125%, due 08/15/05................. 1,500,000 1,479,639 Republic of Italy 6.875%, due 09/27/23.................. 1,500,000 1,348,594 S.E. Banken 144-A 6.625%, due 03/12/01.................. 2,000,000 1,948,200 ----------- 9,203,697 ----------- U.S. GOVERNMENT AGENCIES--17.87% Federal Home Loan Mortgage Corp. 8.250%, due 08/15/23... 1,695,000 1,750,617 Federal Home Loan Mortgage Corp. Gold 8.000%, due 05/01/23................................... 928,443 936,850 9.000%, due 03/01/24................................... 467,845 491,060 9.500%, due 04/01/25................................... 1,530,375 1,625,538 Federal National Mortgage Association 7.000%, due 03/01/03................................... 2,055,000 2,047,294 6.000%, due 12/25/08................................... 2,600,000 2,295,514 6.700%, due 08/25/20................................... 3,860,000 3,619,599 8.000%, due 06/01/24................................... 319,102 321,593 8.000%, due 07/01/24................................... 18,032 18,173 8.000%, due 08/01/24................................... 42,378 42,709 8.000%, due 11/01/24................................... 23,832 24,018 8.000%, due 03/01/25................................... 206,820 208,434 8.000%, due 04/01/25................................... 676,076 681,353 7.500%, due 05/01/25................................... 1,561,833 1,541,810 8.000%, due 05/01/25................................... 1,818,141 1,832,330 8.000%, due 06/01/25................................... 1,540,977 1,553,004 6.000%, due 03/01/26................................... 1,850,000 1,730,314 6.500%, due 03/01/26................................... 603,222 564,196 7.000%, due 03/01/26................................... 4,695,000 4,517,435 Federal National Mortgage Association Principal Strip 0.000%, due 11/22/01(c)................ 2,400,000 2,343,360 Government National Mortgage Association 11.000%, due 09/15/15.................................. 388,028 434,225 7.750%, due 06/16/20................................... 600,000 613,406 8.000%, due 08/15/22................................... 1,049,680 1,063,965 7.000%, due 06/15/23................................... 430,480 412,854 7.000%, due 07/15/23................................... 451,385 432,903 7.000%, due 09/15/23................................... 99,483 95,410 9.000%, due 07/15/24................................... 194,488 203,482 8.500%, due 11/15/24................................... 186,892 192,147 8.500%, due 01/15/25................................... 408,634 420,124
FACE AMOUNT VALUE ----------- ------------ 9.000%, due 05/15/25................................. $ 507,805 $ 531,288 7.500%, due 06/15/25................................. 2,186,028 2,154,134 8.000%, due 02/15/26................................. 2,489,061 2,522,937 7.500%, due 03/15/26................................. 2,250,000 2,216,936 6.500%, due 03/20/26................................. 1,503,472 1,391,170 ------------ 40,830,182 ------------ U.S. GOVERNMENT OBLIGATIONS--26.73% U.S. Treasury Notes and Bonds 5.500%, due 11/15/98................................. 6,975,000 6,866,016 6.375%, due 03/31/01................................. 11,785,000 11,729,752 5.750%, due 08/15/03................................. 15,025,000 14,297,219 6.500%, due 05/15/05................................. 8,625,000 8,503,707 8.125%, due 05/15/21................................. 1,480,000 1,667,312 U.S. Treasury Principal Strips 0.000%, due 11/15/04................................. 16,725,000 9,547,132 0.000%, due 05/15/05................................. 9,860,000 5,429,113 0.000%, due 02/15/15................................. 4,990,000 1,348,647 0.000%, due 08/15/15................................. 1,470,000 382,876 0.000%, due 11/15/15................................. 5,240,000 1,338,610 ------------ 61,110,384 ------------ Total U.S. Bonds (Cost $128,481,496).................. 127,399,583 ------------ SHORT-TERM INVESTMENTS--6.76% U.S. GOVERNMENT OBLIGATIONS--0.34% U.S. Treasury Bills 5.030%, due 11/14/96................................. 15,000 14,715 5.050%, due 11/14/96................................. 55,000 53,951 5.140%, due 11/14/96................................. 710,000 696,213 ------------ 764,879 ------------ COMMERCIAL PAPER--6.42% Airtouch Communications, Inc. 5.480%, due 07/01/96.... 1,000,000 1,000,000 Dial Corp. 5.550%, due 07/17/96....................... 2,000,000 1,995,067 FMC Corp. 5.480%, due 07/08/96........................ 1,500,000 1,498,401 The Limited, Inc., 5.650%, due 07/01/96............... 2,000,000 2,000,000 Lockheed Martin Corp. 5.630%, due 07/01/96............ 4,216,000 4,216,000 Melville Corp. 5.650%, due 07/01/96................... 2,500,000 2,500,000 PS Colorado Credit Corp. 5.550%, due 07/02/96......... 1,500,000 1,499,769 ------------ 14,709,237 ------------ Total Short-Term Investments (Cost $15,474,116)....... 15,474,116 ------------ Total Investments (Cost $221,129,000)--103.85%(a)...................... 237,403,692 ------------ Liabilities, less cash and other assets--(3.85%)...... (8,795,399) ------------ Net Assets--100%...................................... $228,608,293 ============
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 10 U.S. BALANCED FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $221,129,000; and net unrealized appreciation consisted of: Gross unrealized appreciation................................ $18,777,078 Gross unrealized depreciation................................ (2,502,386) ----------- Net unrealized appreciation................................ $16,274,692 ===========
(b) Non-income producing security (c) Interest rate 0.00% until 11/01/96, 7.94%, until maturity MTN: Medium term note FUTURES CONTRACTS (NOTE 4) The U.S. Balanced Fund had the following open futures contracts as of June 30, 1996:
SETTLEMENT CURRENT UNREALIZED DATE COST/PROCEEDS VALUE GAIN/(LOSS) ---------- ------------- ----------- ----------- INTEREST RATE FUTURES BUY CONTRACTS 5 Year U.S. Treasury Note, 36 contracts..... Sept. 1996 $ 1,863,625 $ 1,862,031 $(1,594) 10 Year U.S. Treasury Note, 23 contracts..... Sept. 1996 2,473,937 2,472,500 (1,437) 30 Year U.S. Treasury Bond, 17 contracts..... Sept. 1996 3,811,125 3,807,000 (4,125) INDEX FUTURES SALE CON- TRACTS Standard & Poors 500, 46 contracts.............. Sept. 1996 15,637,700 15,566,400 71,300 ------- Total................. $64,144 =======
The aggregate market value of investments pledged to cover margin requirements for the open futures positions at June 30, 1996 was $764,879. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 11 U.S. BALANCED FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1996 ASSETS: Investments, at value (Cost $221,129,000) (Note 1)............... $237,403,692 Receivables: Investment securities sold...................................... 9,757,122 Dividends....................................................... 117,126 Interest........................................................ 1,308,008 Fund shares sold................................................ 112,481 Due from Advisor (Note 2)....................................... 116,395 Other assets..................................................... 54,849 ------------ TOTAL ASSETS.................................................. 248,869,673 ------------ LIABILITIES: Payables: Investment securities purchased................................. 19,680,997 Fund shares redeemed............................................ 366,239 Variation margin (Note 4)....................................... 32,031 Accrued expenses................................................ 182,113 ------------ TOTAL LIABILITIES............................................. 20,261,380 ------------ NET ASSETS........................................................ $228,608,293 ============ NET ASSETS CONSIST OF: Paid in capital (Note 6)......................................... $206,237,387 Accumulated undistributed net investment income.................. 1,459,205 Accumulated net realized gain.................................... 4,572,865 Net unrealized appreciation...................................... 16,338,836 ------------ NET ASSETS.................................................... $228,608,293 ============ OFFERING PRICE PER SHARE: Brinson Class: Net asset value, offering price and redemption price per share (Based on net assets of $227,828,950 and 19,452,253 shares is- sued and outstanding) (Note 6)................................. $ 11.71 ============ SwissKey Class: Net asset value, offering price and redemption price per share (Based on net assets of $779,343 and 66,755 shares issued and outstanding) (Note 6).... $ 11.67 ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 12 U.S. BALANCED FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1996 INVESTMENT INCOME Interest.......................................................... $ 8,113,714 Dividends......................................................... 1,870,968 ----------- TOTAL INCOME................................................... 9,984,682 ----------- EXPENSES: Advisory (Note 2)................................................. 1,465,283 Administration.................................................... 140,841 Custodian......................................................... 76,416 Distribution (Note 5)............................................. 1,205 Other............................................................. 441,819 ----------- TOTAL EXPENSES................................................. 2,125,564 Expenses waived by Advisor (Note 2)............................ (449,752) ----------- NET EXPENSES................................................... 1,675,812 ----------- NET INVESTMENT INCOME ......................................... 8,308,870 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments...................................................... 8,975,089 Futures contracts................................................ (741,884) ----------- Net realized gain.............................................. 8,233,205 ----------- Change in net unrealized appreciation or depreciation on: Investments ..................................................... 8,614,843 Futures contracts................................................ 61,569 ----------- Change in net unrealized appreciation or depreciation.......... 8,676,412 ----------- Net realized and unrealized gain.................................. 16,909,617 ----------- Net increase in net assets resulting from operations.............. $25,218,487 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 13 U.S. BALANCED FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
YEAR DECEMBER 30, 1994* ENDED THROUGH JUNE 30, 1996 JUNE 30, 1995 ------------- ------------------ OPERATIONS: Net investment income........................ $ 8,308,870 $ 2,935,679 Net realized gain............................ 8,233,205 6,155,398 Change in net unrealized appreciation or de- preciation.................................. 8,676,412 7,662,424 ------------ ------------ Net increase in net assets resulting from op- erations.................................... 25,218,487 16,753,501 ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class............................... (7,711,341) (1,993,463) SwissKey Class.............................. (9,781) -- Distributions from net realized gain: Brinson Class............................... (9,885,505) -- SwissKey Class.............................. (992) -- ------------ ------------ Total distributions to shareholders.......... (17,607,619) (1,993,463) ------------ ------------ CAPITAL SHARE TRANSACTIONS: Shares sold.................................. 81,710,433 154,231,504 Shares issued on reinvestment of distribu- tions....................................... 17,593,608 1,991,226 Shares redeemed.............................. (36,030,444) (13,268,940) ------------ ------------ Net increase in net assets resulting from capital share transactions (Note 6).................................... 63,273,597 142,953,790 ------------ ------------ TOTAL INCREASE IN NET ASSETS.............. 70,884,465 157,713,828 ------------ ------------ NET ASSETS: Beginning of period.......................... 157,723,828 10,000 ------------ ------------ End of period (including accumulated undis- tributed net investment income of $1,459,205 and $942,216, respectively)................. $228,608,293 $157,723,828 ============ ============
* Commencement of investment operations See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 14 U.S. BALANCED FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
YEAR DECEMBER 30, 1994* ENDED THROUGH BRINSON CLASS JUNE 30, 1996 JUNE 30, 1995 - ------------------------------------------------------------------------------- Net asset value, beginning of period.......... $ 11.23 $ 10.00 -------- -------- Income from investment operations: Net investment income....................... 0.44 0.23 Net realized and unrealized gain............ 1.04 1.16 -------- -------- Total income from investment operations... 1.48 1.39 -------- -------- Less distributions: Distributions from net investment income.... (0.43) (0.16) Distributions from net realized gain........ (0.57) -- -------- -------- Total distributions....................... (1.00) (0.16) -------- -------- Net asset value, end of period................ $ 11.71 $ 11.23 ======== ======== Total return (non-annualized)................. 13.52% 13.91% Ratios/Supplemental data Net assets, end of period (in 000s).......... $227,829 $157,724 Ratio of expenses to average net assets: Before expense reimbursement................ 1.01% 1.06%** After expense reimbursement................. 0.80% 0.80%** Ratio of net investment income to average net assets: Before expense reimbursement................ 3.76% 4.36%** After expense reimbursement................. 3.97% 4.63%** Portfolio turnover rate...................... 240% 196% Average commission rate paid per share....... $ 0.0481 N/A
*Commencement of investment operations **Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 15 U.S. BALANCED FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout the period presented.
JULY 31, 1995* THROUGH SWISSKEY CLASS JUNE 30, 1996 - -------------------------------------------------------------------------------- Net asset value, beginning of period............................. $ 11.38 ------- Income from investment operations: Net investment income.......................................... 0.42 Net realized and unrealized gain............................... 0.86 ------- Total income from investment operations...................... 1.28 ------- Less distributions: Distributions from net investment income....................... (0.42) Distributions from net realized gain........................... (0.57) ------- Total distributions.......................................... (0.99) ------- Net asset value, end of period................................... $ 11.67 ======= Total return (non-annualized).................................... 11.54% Ratios/Supplemental data Net assets, end of period (in 000s)............................. $ 779 Ratio of expenses to average net assets: Before expense reimbursement................................... 1.51%** After expense reimbursement.................................... 1.30%** Ratio of net investment income to average net assets: Before expense reimbursement................................... 3.26%** After expense reimbursement.................................... 3.47%** Portfolio turnover rate......................................... 240% Average commission rate paid per share.......................... $0.0481
*Commencement of SwissKey Class distribution **Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 16 U.S. EQUITY FUND - -------------------------------------------------------------------------------- LOGO The U.S. Equity Fund is an actively managed portfolio that invests in common stocks of U.S. corporations. The Fund is diversified by issue and industry; it is typically 70% invested in large capitalization stocks, with the remaining 30% in intermediate and small capitalization stocks. Investment strategies emphasize stock selection with attention to the management of factor and industry exposures. For the period July 31, 1995 to June 30, 1996, the SwissKey U.S. Equity Fund provided a total return of 25.70% compared to its benchmark, the Wilshire 5000 Index, return of 21.23%. The total return of the SwissKey U.S. Equity Fund was 10.90% for the first six months of 1996, compared to the 10.27% return for the Wilshire 5000 Index. The following paragraphs review the sources of excess returns in the first half of 1996. Market exposure (average beta of 1.02) modestly benefited Fund relative performance in the strong equity market environment which characterized the first half of 1996. However, other broad factor positions were a fairly neutral influence on results. While there was a positive return to the Fund's lower than benchmark exposure to both growth and yield, the Fund's tilt toward the traditional value measures of low price-earnings and price-book proved an offset. An underweighting in issues with above normal foreign-source earnings added to results as profit comparisons for multinationals began to suffer from the strong dollar, as well as some weakness in the European economies. Industry weightings also had a neutral impact on excess returns calendar year- to-date. On the positive side, the Fund's low exposure to telephone and electric utility stocks benefited results due to heightened investor concern over intensifying competition as well as higher interest rates. Offsetting these gains were the Fund overweightings in bank and insurance stocks where relative performance also often varies inversely with interest rates. Among basic industries, the Fund underweighting in chemicals was an advantage but was negated by an overweighting in papers and steel. Other positive results included overweightings in aerospace, cosmetics and leisure stocks, while negative impacts included the overweightings in railroads and pollution control and the underweighting in international oil issues. The overall stock specific influence upon the Fund's active return was significantly positive in the first six months of 1996. Among large capitalization issues, the best performers were Citicorp, Sprint, Cigna and Corning, while the worst were Lockheed Martin, Kimberly Clark, Automatic Data Processing and Mattel. In the intermediate capitalization segment of the Fund, the strongest contributors were Allergan, Nextel Communications, Food Lion and Comverse Technology, while the weakest were Forest Labs, Dial Corp., American Mobile Satellite and Lyondell Petrochemical. ------------------------------------------------------------ 17 U.S. EQUITY FUND - -------------------------------------------------------------------------------- LOGO TOTAL RETURN
6 months ended Since 6/30/96 inception* - ---------------------------------------------- SWISSKEY U.S. EQUITY FUND 10.90% 25.70% - ---------------------------------------------- Wilshire 5000 Index 10.27 21.23 - ----------------------------------------------
*Inception date of the SwissKey U.S. Equity Fund is July 31, 1995. Total return includes reinvestment of all capital gain and income distributions. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $10,000 This chart shows the growth any income taxes payable by in the value of an shareholders on income divi- investment in the SwissKey dends and capital gain dis- U.S. Equity Fund and the tributions. Past perfor- Wilshire 5000 Index if you mance is no guarantee of fu- had invested $10,000 on July ture results. Share price 31, 1995, and had reinvested and return will vary with all your income dividends market conditions; investors and capital gain may realize a gain or loss distributions through June upon redemption. 30, 1996. No adjustment has been made for SWISSKEY U.S. EQUITY FUND VS. WILSHIRE 5000 INDEX Wealth Value with Dividends Reinvested [CHART APPEARS HERE] 7/31/95 6/30/96 ------- ------- SwissKey U.S. Equity Fund $10,000 $12,570 Wilshire 5000 Index $10,000 $12,123 Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. ------------------------------------------------------------ 18 U.S. EQUITY FUND - -------------------------------------------------------------------------------- LOGO INDUSTRY DIVERSIFICATION As a Percent of Net Assets As of June 30, 1996 - ------------------------------------------------------------------------------- U.S. EQUITIES Basic Industries Chemicals.............................................................. 0.80% Housing/Paper.......................................................... 3.60 Metals................................................................. 0.35 ----- 4.75 Capital Investments Capital Goods.......................................................... 9.01 Technology............................................................. 4.06 ----- 13.07 Consumer Autos/Durables......................................................... 1.02 Discretionary.......................................................... 7.14 Health: Drugs.......................................................... 7.37 Health: Non-Drugs...................................................... 3.72 Non-Durables........................................................... 10.57 Retail/Apparel......................................................... 4.34 ----- 34.16
*The Fund held a long position in stock index futures on June 30, 1996 which increased U.S. equity exposure from 96.11% to 98.94% and reduced exposure to Short-Term investments from 2.86% to 0.03%. - ------------------------------------------------------------ TOP TEN U.S. EQUITY HOLDINGS As of June 30, 1996
Percent of Net Assets - -------------------------------------------- 1. Citicorp 5.04% 2. Lockheed Martin Corp. 4.90 3. Chase Manhattan Corp. 4.20 4. Burlington Northern Santa Fe 3.81 5. Enron Corp. 3.71 6. Avon Products, Inc. 3.34 7. Schering Plough Corp. 3.05 8. Kimberly-Clark Corp. 2.91 9. Mattel, Inc. 2.75 10. Aon Corp. 2.61 - --------------------------------------------
Energy.................................................................. 5.20% Financial Banks.................................................................. 11.02 Non-Banks.............................................................. 9.93 ------ 20.95 Services................................................................ 6.47 Transportation.......................................................... 4.86 Utilities............................................................... 3.96 Miscellaneous........................................................... 2.69 ------ Total U.S. Equities.................................................. 96.11* ------ SHORT-TERM INVESTMENTS.................................................. 2.86* ------ TOTAL INVESTMENTS.................................................... 98.97 CASH AND OTHER ASSETS, LESS LIABILITIES ...................................................... 1.03 ------ NET ASSETS.............................................................. 100.00% ======
- --------------- ------------------------------------------------------------ 19 U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - --------------------------------------------------------------------------------
SHARES VALUE ------- ------------ U.S. Equities -- 96.11% Aetna Life & Casualty Co................................... 33,300 $ 2,380,950 Allergan, Inc.............................................. 55,600 2,182,300 Allstate Corp.............................................. 31,600 1,441,750 Alza Corp. (b)............................................. 54,200 1,483,725 American Mobile Satellite Corp., Inc. (b).................. 5,200 80,600 Aon Corp................................................... 67,700 3,435,775 Automatic Data Processing, Inc............................. 63,600 2,456,550 Avon Products, Inc......................................... 97,600 4,404,200 Bard (C.R.), Inc........................................... 33,600 1,142,400 Beckman Instruments, Inc................................... 21,700 824,600 Biogen, Inc. (b)........................................... 5,000 274,375 Birmingham Steel Corp...................................... 21,700 355,338 Boeing Co.................................................. 14,400 1,254,600 Boston Technology, Inc. (b)................................ 21,700 366,188 Brinker International, Inc. (b)............................ 15,700 235,500 Burlington Northern Santa Fe............................... 62,000 5,014,250 Centerior Energy Co........................................ 45,800 337,775 Chase Manhattan Corp....................................... 78,300 5,529,938 CIGNA Corp................................................. 26,900 3,170,838 Citicorp................................................... 80,300 6,634,787 CMS Energy Corp............................................ 59,300 1,830,887 Coca-Cola Enterprises, Inc................................. 52,000 1,800,500 Comerica, Inc.............................................. 14,900 664,913 Comverse Techonology, Inc. (b)............................. 16,600 506,300 Cooper Cameron Corp. (b)................................... 7,029 307,519 Corning, Inc............................................... 84,800 3,254,200 Dial Corp.................................................. 44,300 1,268,087 EMC Corp./Mass (b)......................................... 61,700 1,149,163 Enron Corp................................................. 119,700 4,892,737 Entergy Corp............................................... 16,500 468,188 Federal Express Corp. (b).................................. 6,200 508,400 Federated Department Stores (b)............................ 57,800 1,972,425 FileNet Corp. (b).......................................... 8,400 306,600 First Data Corp............................................ 16,215 1,291,120 Food Lion, Inc. Class A.................................... 77,100 611,981 Ford Motor Co.............................................. 54,700 1,770,912 Forest Laboratories, Inc. (b).............................. 36,800 1,421,400 Gannett Co., Inc........................................... 36,200 2,561,150 General Instrument Corp. (b)............................... 86,500 2,497,688 Genzyme Corp. (b).......................................... 7,100 356,775 Goodyear Tire & Rubber Co.................................. 65,100 3,141,075 Health Care and Retirement Corp. (b)....................... 29,250 694,687 Honeywell, Inc............................................. 43,800 2,387,100 Inland Steel Industries, Inc............................... 11,000 215,875 Interpublic Group of Companies, Inc........................ 27,000 1,265,625 James River Corp. of Virginia.............................. 31,200 822,900 Kimberly-Clark Corp........................................ 49,600 3,831,600 Kroger Co. (b)............................................. 22,800 900,600 Lockheed Martin Corp....................................... 76,900 6,459,600 Lyondell Petrochemical Co.................................. 59,300 1,430,613 Magna Group, Inc........................................... 9,300 223,200 Manor Care, Inc............................................ 35,500 1,397,812 Mattel, Inc................................................ 126,375 3,617,484
SHARES VALUE ---------- ------------ Melville Corp........................................... 73,700 $ 2,984,850 Nabisco Holdings Corp. Class A.......................... 6,000 212,250 National Semiconductor Corp. (b)........................ 63,200 979,600 Nextel Communications, Inc. Class A (b)................. 54,600 1,040,812 Old Republic International Corp......................... 31,550 682,269 Owens Illinois, Inc. (b)................................ 48,500 776,000 Pentair, Inc............................................ 25,500 765,000 Pfizer, Inc............................................. 3,700 264,087 Philip Morris Companies, Inc............................ 11,600 1,206,400 RJR Nabisco Convertible Preferred "C"................... 176,600 1,147,900 RJR Nabisco Holdings Corp............................... 18,740 580,940 Schering Plough Corp.................................... 64,000 4,016,000 Seagate Technology, Inc. (b)............................ 16,900 760,500 Sprint Corp............................................. 42,300 1,776,600 State Street Boston Corp................................ 13,000 663,000 Timken Co............................................... 15,100 585,125 Transamerica Corp....................................... 15,100 1,234,425 Tyson Foods, Inc. Class A............................... 45,000 1,231,875 Ultramar Corp........................................... 23,700 687,300 US Bancorp.............................................. 37,000 1,336,625 USF&G Corp.............................................. 49,200 805,650 Westvaco Corp........................................... 13,000 388,375 Whitman Corp............................................ 22,800 550,050 WMX Technologies, Inc................................... 68,900 2,256,475 York International Corp................................. 7,500 388,125 360 Communications Co. (b).............................. 18,833 451,992 ------------ Total U.S. Equities (Cost $108,987,744)................. 126,607,780 ------------ FACE AMOUNT VALUE ---------- ------------ Short-Term Investments -- 2.86% U.S. GOVERNMENT OBLIGATIONS -- 0.22% U.S. Treasury Bills 5.300%, due 11/14/96................ $ 300,000 $ 293,993 ------------ COMMERCIAL PAPER -- 2.64% Airtouch Communications, Inc. 5.480%, due 07/01/96................................... 1,000,000 1,000,000 FMC Corp. 5.480%, due 07/08/96.......................... 250,000 249,734 Kerr-McGee Credit Corp. 5.500%, due 07/09/96............ 250,000 249,694 The Limited, Inc. 5.650%, due 07/01/96.................. 1,000,000 1,000,000 Lockheed Martin Corp. 5.630%, due 07/01/96.............. 971,000 971,000 ------------ 3,470,428 ------------ Total Short-Term Investments (Cost $3,764,421)...................................... 3,764,421 ------------ Total Investments (Cost $112,752,165) -- 98.97% (a)...................... 130,372,201 ------------ Cash and other assets, less liabilities -- 1.03%........ 1,356,544 ------------ Net Assets -- 100%...................................... $131,728,745 ============
See accompanying notes to schedule of investments. - -------------------------------------------------------------------------------- 20 U.S. EQUITY FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - -------------------------------------------------------------------------------- NOTES TO SCHEDULE OF INVESTMENTS (a) Aggregate cost for federal income tax purposes was $112,752,165; and net unrealized appreciation consisted of: Gross unrealized appreciation................................ $18,765,809 Gross unrealized depreciation................................ (1,145,773) ----------- Net unrealized appreciation................................ $17,620,036 ===========
(b) Non-income producing security FUTURES CONTRACTS (NOTE 4) The U.S. Equity Fund had the following open index futures contracts as of June 30, 1996:
SETTLEMENT CURRENT UNREALIZED DATE COST VALUE (LOSS) ---------- ---------- ---------- ---------- INDEX FUTURES BUY CONTRACTS Standard & Poors 500, 11 con- tracts...................... Sept. 1996 $3,725,175 $3,722,400 $(2,775) =======
The aggregate market value of investments pledged to cover margin requirements for the open futures positions at June 30, 1996 was $293,993. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 21 U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1996 ASSETS: Investments, at value (Cost $112,752,165) (Note 1) .............. $130,372,201 Cash............................................................. 279,476 Receivables: Investment securities sold...................................... 1,259,417 Dividends....................................................... 157,089 Variation margin (Note 4)....................................... 20,625 Fund shares sold................................................ 147,035 Due from Advisor (Note 2)....................................... 3,743 Other assets..................................................... 53,198 ------------ TOTAL ASSETS.................................................. 132,292,784 ------------ LIABILITIES: Payables: Investment securities purchased................................. 472,332 Accrued expenses................................................ 91,707 ------------ TOTAL LIABILITIES............................................. 564,039 ------------ NET ASSETS........................................................ $131,728,745 ============ NET ASSETS CONSIST OF: Paid in capital (Note 6)......................................... $107,348,442 Accumulated undistributed net investment income.................. 216,006 Accumulated net realized gain.................................... 6,547,036 Net unrealized appreciation...................................... 17,617,261 ------------ NET ASSETS.................................................... $131,728,745 ============ OFFERING PRICE PER SHARE: Brinson Class: Net asset value, offering price and redemption price per share (Based on net assets of $126,341,709 and 8,659,822 shares is- sued and outstanding) (Note 6)................................. $ 14.59 ============ SwissKey Class: Net asset value, offering price and redemption price per share (Based on net assets of $5,387,036 and 369,425 shares issued and outstanding) (Note 6)...................................... $ 14.58 ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 22 U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 1996 INVESTMENT INCOME: Dividends......................................................... $ 1,833,948 Interest.......................................................... 234,616 ----------- TOTAL INCOME................................................... 2,068,564 ----------- EXPENSES: Advisory (Note 2)................................................. 638,063 Accounting........................................................ 71,226 Transfer Agent.................................................... 61,038 Administration.................................................... 58,286 Professional...................................................... 57,786 Custodian......................................................... 44,117 Distribution (Note 5)............................................. 6,178 Other............................................................. 110,440 ----------- TOTAL EXPENSES................................................. 1,047,134 Expenses waived by Advisor (Note 2)............................ (311,741) ----------- NET EXPENSES................................................... 735,393 ----------- NET INVESTMENT INCOME.......................................... 1,333,171 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain on: Investments...................................................... 7,340,103 Futures contracts................................................ 486,290 ----------- Net realized gain ............................................. 7,826,393 ----------- Change in net unrealized appreciation or depreciation on: Investments ..................................................... 13,381,838 Futures contracts ............................................... (24,600) ----------- Change in net unrealized appreciation or depreciation.......... 13,357,238 ----------- Net realized and unrealized gain ................................. 21,183,631 ----------- Net increase in net assets resulting from operations.............. $22,516,802 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 23 U.S. EQUITY FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
YEAR YEAR ENDED ENDED JUNE 30, 1996 JUNE 30, 1995 ------------- ------------- OPERATIONS: Net investment income............................. $ 1,333,171 $ 440,023 Net realized gain ................................ 7,826,393 552,822 Change in net unrealized appreciation or deprecia- tion ............................................ 13,357,238 4,476,351 ------------ ----------- Net increase in net assets resulting from opera- tions............................................ 22,516,802 5,469,196 ------------ ----------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class................................... (1,233,245) (318,699) SwissKey Class.................................. (17,809) -- Distributions from net realized gain: Brinson Class................................... (1,764,213) (47,930) SwissKey Class.................................. (2,611) -- ------------ ----------- Total distributions to shareholders............... (3,017,878) (366,629) ------------ ----------- CAPITAL SHARE TRANSACTIONS: Shares sold....................................... 71,976,805 30,972,427 Shares issued on reinvestment of distributions.... 2,944,272 349,100 Shares redeemed................................... (5,264,717) (2,050,830) ------------ ----------- Net increase in net assets resulting from capital share transactions (Note 6)...................... 69,656,360 29,270,697 ------------ ----------- TOTAL INCREASE IN NET ASSETS................... 89,155,284 34,373,264 ------------ ----------- NET ASSETS: Beginning of year................................. 42,573,461 8,200,197 ------------ ----------- End of year (including accumulated undistributed net investment income of $216,006 and $133,889, respectively).................................... $131,728,745 $42,573,461 ============ ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 24 U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout each period presented.
YEAR YEAR FEBRUARY 22, 1994* ENDED ENDED THROUGH BRINSON CLASS JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1994 - ------------------------------------------------------------------------------- Net asset value, beginning of period......................... $ 11.53 $ 9.65 $10.00 -------- ------- ------ Income from investment opera- tions: Net investment income......... 0.17 0.16 0.05 Net realized and unrealized gain (loss).................. 3.31 1.89 (0.36) -------- ------- ------ Total income (loss) from in- vestment operations........ 3.48 2.05 (0.31) -------- ------- ------ Less distributions: Distributions from net invest- ment income.................. (0.17) (0.14) (0.04) Distributions from net real- ized gain.................... (0.25) (0.03) -- -------- ------- ------ Total distributions......... (0.42) (0.17) (0.04) -------- ------- ------ Net asset value, end of period.. $ 14.59 $ 11.53 $ 9.65 ======== ======= ====== Total return (non-annualized)... 30.57% 21.45% (3.10%) Ratios/Supplemental data Net assets, end of period (in 000s)......................... $126,342 $42,573 $8,200 Ratio of expenses to average net assets: Before expense reimbursement.. 1.14% 1.70% 5.40% ** After expense reimbursement... 0.80% 0.80% 0.80% ** Ratio of net investment income to average net assets: Before expense reimbursement.. 1.13% 1.09% (2.82%)** After expense reimbursement... 1.47% 1.99% 1.78% ** Portfolio turnover rate........ 36% 33% 9% Average commission rate paid per share..................... $ 0.0457 N/A N/A
*Commencement of investment operations **Annualized N/A = Not applicable See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 25 U.S. EQUITY FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout the period presented.
JULY 31, 1995* THROUGH SWISSKEY CLASS JUNE 30, 1996 - -------------------------------------------------------------------------------- Net asset value, beginning of period............................. $ 11.94 ------- Income from investment operations: Net investment income.......................................... 0.10 Net realized and unrealized gain............................... 2.92 ------- Total income from investment operations...................... 3.02 ------- Less distributions: Distributions from net investment income....................... (0.13) Distributions from net realized gain........................... (0.25) ------- Total distributions.......................................... (0.38) ------- Net asset value, end of period................................... $ 14.58 ======= Total return (non-annualized).................................... 25.70% Ratios/Supplemental data Net assets, end of period (in 000s)............................. $ 5,387 Ratio of expenses to average net assets: Before expense reimbursement................................... 1.66%** After expense reimbursement.................................... 1.32%** Ratio of net investment income to average net assets: Before expense reimbursement................................... 0.61%** After expense reimbursement.................................... 0.95%** Portfolio turnover rate......................................... 36% Average commission rate paid per share.......................... $0.0457
*Commencement of SwissKey Class distribution **Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 26 U.S. BOND FUND - -------------------------------------------------------------------------------- LOGO The U.S. Bond Fund is an actively managed portfolio of debt securities selected from a wide range of maturities and market sectors. We believe markets do not always efficiently price fixed income securities and that a fundamental value-based investment process can increase portfolio returns. Our fixed income strategies combine judgments about the absolute value of the fixed income universe and the relative value of issuer sectors, maturity intervals, quality and coupon segments and specific fixed income securities. The SwissKey U.S. Bond Fund produced a return of 3.24% since its inception on August 31, 1995 compared to the Salomon Brothers Broad Investment Grade (BIG) Bond Index return of 4.00%. In the first half of 1996, the Fund returned -1.94% compared to the Benchmark return of -1.25%. In January 1996 the Federal Reserve cut the overnight funds target rate from 5.50% to 5.25% where it remained throughout the first half of the year. In spite of that drop in short-term interest rates, intermediate and long-term interest rates rose sharply in the first half of 1996. Higher rates of utilization in product and labor markets gave rise to heightened investor concerns about inflation and possible increases in overnight funds rates, while rising equity market prices drew investors away from fixed income securities. By June 30th the yields on intermediate and long-term U.S. bonds were about 100 basis points above the levels of six months earlier. INDUSTRY DIVERSIFICATION As a Percentage of Net Assets As of June 30, 1996 - -------------------------------------------------------------------------------- U.S. BONDS Corporate Bonds Asset-backed........................................................... 2.06% CMO.................................................................... 2.44 Financial.............................................................. 12.26 Telecommunications..................................................... 2.40 Transportation......................................................... 1.01 ------ Total U.S. Corporate Bonds........................................... 20.17 U.S. Government Agencies................................................ 30.42 U.S. Government Obligations............................................. 42.21 International Dollar Bonds.............................................. 4.13 ------ Total U.S. Bonds..................................................... 96.93 ------ SHORT-TERM INVESTMENTS.................................................. 10.74 ------ TOTAL INVESTMENTS.................................................... 107.67 LIABILITIES, LESS CASH AND OTHER ASSETS.................................................. (7.67) ------ NET ASSETS.............................................................. 100.00% ======
------------------------------------------------------------ 27 U.S. BOND FUND - -------------------------------------------------------------------------------- LOGO TOTAL RETURN
6 months ended Since 6/30/96 Inception* - ----------------------------------------------------------------------------- SWISSKEY U.S. BOND FUND -1.94% 3.24% - ----------------------------------------------------------------------------- Salomon Brothers Broad Investment Grade (BIG) Bond Index -1.25 4.00 - -----------------------------------------------------------------------------
*Inception date of the SwissKey U.S. Bond Fund is August 31, 1995. Total return includes reinvestment of all capital gain and income distributions. ILLUSTRATION OF AN ASSUMED INVESTMENT OF $10,000 This chart shows the growth any income taxes payable by in the value of an shareholders on income investment in the SwissKey dividends and capital gain U.S. Bond Fund and the distributions. Past Salomon Brothers Broad performance is no guarantee Investment Grade (BIG) Bond of future results. Share Index if you had invested price and return will vary $10,000 on August 31, 1995, with market conditions; and had reinvested all your investors may realize a gain income dividends and capital or loss upon redemption. gain distributions through June 30, 1996. No adjustment has been made for SWISSKEY U.S. BOND FUND VS. SALOMON BROTHERS BIG BOND INDEX Wealth Value with Dividends Reinvested [CHART APPEARS HERE] 8/31/95 6/30/96 ------- ------- SwissKey U.S. Bond Fund $10,000 $10,324 Salomon Brothers BIG Bond Index $10,000 $10,400 Fund returns are net of all fees and costs, while the Index returns are based solely on market returns without deduction for fees or transaction costs for rebalancing. ------------------------------------------------------------ 28 U.S. BOND FUND -- SCHEDULE OF INVESTMENTS June 30, 1996 - --------------------------------------------------------------------------------
FACE AMOUNT VALUE ---------- ----------- Bonds -- 96.93% U.S. CORPORATE BONDS -- 20.17% American Express Credit Account Master Trust 96-1A 6.800%, due 12/15/03................................... $ 100,000 $ 100,430 Capital One Bank 6.830%, due 05/17/99................... 185,000 184,600 Citicorp Mortgage Securities 5.750%, due 06/25/09....... 87,336 71,830 Countrywide Funding FRN 6.600%, due 12/01/03............ 250,000 239,687 Dayton Hudson Credit Card 95-1 6.100%, due 02/25/02..... 100,000 99,548 Delta Air Lines 10.060%, due 01/02/16................... 85,000 98,228 GMAC MTN 7.450%, due 06/05/97........................... 250,000 252,953 Green Tree Financial 94-2 8.300%, due 05/15/19.......... 160,000 164,203 Lehman Brothers Holdings 7.250%, due 04/15/03........... 225,000 222,265 News America Corp. 7.750%, due 01/20/24................. 250,000 232,066 Salomon, Inc., 6.750%, due 02/15/03..................... 300,000 287,344 ----------- 1,953,154 ----------- INTERNATIONAL DOLLAR BONDS -- 4.13% Hanson PLC Notes 6.750%, due 09/15/05................... 100,000 95,896 Republic of Italy 6.875%, due 09/27/23.................. 250,000 225,313 Royal Bank of Scotland 7.375%, due 04/01/06............. 80,000 78,120 ----------- 399,329 ----------- U.S. GOVERNMENT AGENCIES -- 30.42% Federal Home Loan Mortgage Corp. 5.800%, due 08/15/19................................... 330,000 297,191 8.250%, due 08/15/23................................... 220,000 227,219 Federal Home Loan Mortgage Corp. Gold 6.000%, due 06/01/03................................... 115,000 110,616 6.000%, due 03/01/11................................... 245,000 231,525 8.000%, due 11/01/22................................... 76,410 77,329 Federal National Mortgage Association................... 7.500%, due 05/01/25................................... 222,457 219,605 6.500%, due 02/01/26................................... 134,433 125,695 6.500%, due 03/01/26................................... 350,322 327,658 7.000%, due 03/01/26................................... 395,000 380,061 Federal National Mortgage Association Principal Strip 0.000%, due 11/22/01(b)................................ 200,000 195,280 Government National Mortgage Association 9.000%, due 12/15/17................................... 74,394 78,717 7.500%, due 12/15/22................................... 432,167 428,904 7.500%, due 06/15/25................................... 137,775 135,765 6.500%, due 03/20/26................................... 119,481 110,556 ----------- 2,946,121 -----------
See accompanying notes to financial statements.
FACE AMOUNT VALUE ---------- ----------- U.S. GOVERNMENT OBLIGATIONS -- 42.21% U.S. Treasury Notes and Bonds 5.500%, due 11/15/98................................... $ 205,000 $ 201,797 6.375%, due 03/31/01................................... 1,275,000 1,269,023 6.250%, due 02/15/03................................... 100,000 98,187 5.750%, due 08/15/03................................... 240,000 228,375 6.500%, due 05/15/05................................... 1,065,000 1,050,023 8.125%, due 05/15/21................................... 380,000 428,093 U.S. Treasury Principal Strips 0.000%, due 11/15/04................................... 820,000 468,081 0.000%, due 02/15/15................................... 480,000 129,730 0.000%, due 08/15/15................................... 820,000 213,577 ----------- 4,086,886 ----------- Total U.S. Bonds (Cost $9,531,753)...................... 9,385,490 ----------- Short-Term Investments -- 10.74% COMMERCIAL PAPER -- 10.74% FMC Corp. 5.480%, due 07/08/96.......................... 300,000 299,681 The Limited, Inc. 5.650%, due 07/01/96.................. 400,000 400,000 Melville Corp. 5.650%, due 07/01/96..................... 340,000 340,000 ----------- Total Short-Term Investments (Cost $1,039,681)...................................... 1,039,681 ----------- Total Investments (Cost $10,571,434) -- 107.67%(a)....................... 10,425,171 ----------- Liabilities, less cash and other assets --(7.67%)....... (742,637) ----------- Net Assets -- 100%...................................... $ 9,682,534 ===========
(a) Aggregate cost for federal income tax purposes was $10,571,434; and net unrealized depreciation consisted of: Gross unrealized ap- preciation......... $ 22,490 Gross unrealized de- preciation......... (168,753) --------- Net unrealized de- preciation........ $(146,263) =========
(b) Interest rate 0.00% until 11/01/96, 7.94% until maturity. FRN:Floating rate note--The rate disclosed is that in effect at June 30, 1996. MTN: Medium term note - -------------------------------------------------------------------------------- 29 U.S. BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1996 ASSETS: Investments, at value (Cost $10,571,434) (Note 1)................ $10,425,171 Cash............................................................. 46,542 Receivables: Investment securities sold...................................... 422,924 Interest........................................................ 92,192 Due from Advisor (Note 2)....................................... 55,316 Other assets..................................................... 15,501 ----------- TOTAL ASSETS.................................................. 11,057,646 ----------- LIABILITIES: Payables: Investment securities purchased................................. 1,311,852 Accrued expenses................................................ 63,260 ----------- TOTAL LIABILITIES............................................. 1,375,112 ----------- NET ASSETS........................................................ $ 9,682,534 =========== NET ASSETS CONSIST OF: Paid in capital (Note 6)......................................... $ 9,770,407 Accumulated undistributed net investment income.................. 90,190 Accumulated net realized loss.................................... (31,800) Net unrealized depreciation ..................................... (146,263) ----------- NET ASSETS.................................................... $ 9,682,534 =========== OFFERING PRICE PER SHARE: Brinson Class: Net asset value, offering price and redemption price per share (Based on net assets of $9,046,722 and 911,170 shares issued and outstanding) (Note 6)...................................... $ 9.93 =========== SwissKey Class: Net asset value, offering price and redemption price per share (Based on net assets of $635,812 and 64,124 shares issued and outstanding) (Note 6).......................................... $ 9.92 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 30 U.S. BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS FOR THE PERIOD AUGUST 31, 1995* TO JUNE 30, 1996 INVESTMENT INCOME: Interest............................................................ $ 503,035 --------- TOTAL INCOME..................................................... 503,035 --------- EXPENSES: Registration........................................................ 47,508 Professional........................................................ 44,175 Transfer Agent...................................................... 41,400 Advisory (Note 2)................................................... 37,868 Accounting.......................................................... 34,335 Printing............................................................ 29,262 Custodian........................................................... 25,029 Distribution (Note 5)............................................... 1,363 Other............................................................... 16,080 --------- TOTAL EXPENSES................................................... 277,020 Expenses waived and reimbursed by Advisor (Note 2)............... (230,216) --------- NET EXPENSES..................................................... 46,804 --------- NET INVESTMENT INCOME ........................................... 456,231 --------- NET REALIZED AND UNREALIZED GAIN (LOSS): Net realized loss................................................... (11,035) Change in net unrealized appreciation or depreciation............... (146,263) --------- Net realized and unrealized loss.................................... (157,298) --------- Net increase in net assets resulting from operations................ $ 298,933 =========
*Commencement of investment operations See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 31 U.S. BOND FUND -- FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENT OF CHANGES IN NET ASSETS FOR THE PERIOD AUGUST 31, 1995* TO JUNE 30, 1996 OPERATIONS: Net investment income............................................ $ 456,231 Net realized loss................................................ (11,035) Change in net unrealized appreciation or depreciation............ (146,263) ----------- Net increase in net assets resulting from operations............. 298,933 ----------- DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income: Brinson Class................................................... (350,335) SwissKey Class.................................................. (13,132) Distributions in excess of net realized gain: Brinson Class................................................... (23,071) SwissKey Class.................................................. (268) ----------- Total distributions to shareholders.............................. (386,806) ----------- CAPITAL SHARE TRANSACTIONS: Shares sold...................................................... 10,200,031 Shares issued on reinvestment of distributions................... 386,807 Shares redeemed.................................................. (867,431) ----------- Net increase in net assets resulting from capital share transac- tions (Note 6).................................................. 9,719,407 ----------- TOTAL INCREASE IN NET ASSETS.................................. 9,631,534 ----------- NET ASSETS: Beginning of period.............................................. 51,000 ----------- End of period (including accumulated undistributed net investment income of $90,190).............................................. $ 9,682,534 ===========
* Commencement of investment operations See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 32 U.S. BOND FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout the period presented.
AUGUST 31, 1995* THROUGH BRINSON CLASS JUNE 30, 1996 - -------------------------------------------------------------------------------- Net asset value, beginning of period........................... $10.00 ------ Income from investment operations: Net investment income........................................ 0.50 Net realized and unrealized loss............................. (0.14) ------ Total income from investment operations.................... 0.36 ------ Less distributions: Distributions from net investment income..................... (0.40) Distributions in excess of net realized gain................. (0.03) ------ Total distributions........................................ (0.43) ------ Net asset value, end of period................................. $ 9.93 ====== Total return (non-annualized).................................. 3.60% Ratios/Supplemental data Net assets, end of period (in 000s)........................... $9,047 Ratio of expenses to average net assets: Before expense reimbursement................................. 3.63%** After expense reimbursement.................................. 0.60%** Ratio of net investment income to average net assets: Before expense reimbursement................................. 3.00%** After expense reimbursement.................................. 6.03%** Portfolio turnover rate....................................... 363%
*Commencement of investment operations **Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 33 U.S. BOND FUND -- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The table below sets forth financial data for one share of capital stock outstanding throughout the period presented.
AUGUST 31, 1995* THROUGH JUNE 30, SWISSKEY CLASS 1996 - -------------------------------------------------------------------------------- Net asset value, beginning of period........................... $10.00 ------ Income from investment operations: Net investment income........................................ 0.46 Net realized and unrealized loss............................. (0.13) ------ Total income from investment operations.................... 0.33 ------ Less distributions: Distributions from net investment income..................... (0.38) Distributions in excess of net realized gain................. (0.03) ------ Total distributions........................................ (0.41) ------ Net asset value, end of period................................. $ 9.92 ====== Total return (non-annualized).................................. 3.24% Ratios/Supplemental data Net assets, end of period (in 000s)........................... $636 Ratio of expenses to average net assets: Before expense reimbursement................................. 4.10%** After expense reimbursement.................................. 1.07%** Ratio of net investment income to average net assets: Before expense reimbursement................................. 2.53%** After expense reimbursement.................................. 5.56%** Portfolio turnover rate....................................... 363%
*Commencement of investment operations **Annualized See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 34 THE SWISSKEY FUNDS -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1.SIGNIFICANT ACCOUNTING POLICIES The Brinson Funds (the "Trust") is an open-end, management investment company registered under the Investment Company Act of 1940, as amended, as a series company. The Trust currently offers shares of seven series: Global Fund, Global Equity Fund, Global Bond Fund, U.S. Balanced Fund, U.S. Equity Fund, U.S. Bond Fund, and Non-U.S. Equity Fund. Each Fund has two classes of shares outstanding, Brinson Class and SwissKey Class. There are an unlimited number of shares of each class with par value of $0.001 authorized. Each share represents an identical interest in the investments of the Funds and has the same rights. The following is a summary of significant accounting policies consistently followed by the U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond Fund (each a "Fund," collectively the "Funds") in the preparation of their financial statements. A.INVESTMENT VALUATION: Securities for which market quotations are readily available are valued at the last available sales price on the exchange or market on which they are principally traded, or lacking any sales, at the last available bid price on the exchange or market on which such securities are principally traded. Securities for which market quotations are not readily available, including restricted securities which are subject to limitations on their sale, are valued at fair value as determined in good faith by or under the direction of the Trust's Board of Trustees. Fixed income/debt securities are valued using market quotations or independent services that use prices provided by market makers or estimates of market values obtained from yield data relating to instruments or securities with similar characteristics. Futures contracts are valued at the settlement price established each day on the exchange on which they are traded. Short-term obligations with a maturity of 60 days or less are valued at amortized cost, which approximates market value. B.INVESTMENT TRANSACTIONS: Investment transactions are accounted for on a trade date basis. Gains and losses on securities sold are determined on an identified cost basis. C.INVESTMENT INCOME: Interest income, which includes the amortization of premiums and discounts, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. D.FEDERAL INCOME TAXES: It is the policy of the Funds to comply with all requirements of the Internal Revenue Code (the "Code") applicable to regulated investment companies and to distribute substantially all of their taxable income to their shareholders. The Funds have met the requirements of the Code applicable to regulated investment companies for the period ended June 30, 1996, therefore, no federal income tax provision was required. E.DISTRIBUTIONS TO SHAREHOLDERS: It is the policy of the Funds to distribute their respective net investment income on a semi-annual basis and net capital gains, if any, annually. Distributions to shareholders are recorded on the ex- dividend date. Income and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles. Differences in dividends per share between the classes are due to distribution expenses. Amounts equal to 12.96% and 38.62% of the amount taxable as ordinary income qualify for the dividends received deduction available to corporate shareholders for the U.S. Balanced Fund and the U.S. Equity Fund, respectively. F.INCOME AND EXPENSE ALLOCATIONS: All income earned and expenses incurred by the Funds will be borne on a pro rata basis by each of the classes, except that the Brinson Class will not incur any of the distribution expenses. G.USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. - -------------------------------------------------------------------------------- 35 THE SWISSKEY FUNDS -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 2.INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES Brinson Partners, Inc. (the "Advisor"), a registered investment advisor, provides the Funds with investment management services. As compensation for these services, each Fund pays the Advisor a monthly fee based on the Fund's respective average daily net assets. The Advisor has agreed to waive its fees and reimburse each Fund to the extent total annualized expenses exceed a specified percentage of each Fund's respective average daily net assets. Investment advisory fees and other transactions with affiliates for the period ended June 30, 1996, were as follows:
BRINSON SWISSKEY CLASS CLASS ADVISORY EXPENSE EXPENSE ADVISORY FEES WAIVED FEE CAP CAP FEES AND/OR REIMBURSED -------- ------- -------- ---------- ----------------- U.S. Balanced Fund....... 0.70% 0.80% 1.30% $1,465,283 $449,752 U.S. Equity Fund......... 0.70 0.80 1.32 638,063 311,741 U.S. Bond Fund........... 0.50 0.60 1.07 37,868 230,216
Certain officers of the Funds are also officers of the Advisor. All officers serve without direct compensation from the Funds. Trustees' fees paid to unaffiliated trustees were $7,319, $5,128 and $2,822 for the U.S. Balanced Fund, U.S. Equity Fund, and U.S. Bond Fund, respectively. 3.INVESTMENT TRANSACTIONS Investment transactions for the period ended June 30, 1996, excluding short- term investments, were as follows:
PROCEEDS PURCHASES FROM SALES ------------ ------------ U.S. Balanced Fund.................................... $518,922,718 $457,531,085 U.S. Equity Fund...................................... 96,973,632 31,250,356 U.S. Bond Fund........................................ 41,821,403 32,173,225
4.FUTURES CONTRACTS The Funds may purchase or sell exchange-traded futures contracts, which are contracts that obligate the Funds to make or take delivery of a financial instrument or the cash value of a securities index at a specified future date at a specified price. The Funds enter into such contracts to hedge a portion of their portfolio. Risks of entering into futures contracts include the possibility that there may be an illiquid market or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, the Funds are required to deposit either cash or securities (initial margin). Subsequent payments (variation margin) are made or received by the Funds, generally on a daily basis. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains or losses. The Funds recognize a realized gain or loss when the contract is closed or expires. The statement of operations reflects net realized and net unrealized gains and losses on these contracts. 5.DISTRIBUTION PLAN The Trust has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940. The Plan governs payments made for the expenses incurred in the promotion and distribution of the SwissKey Class of shares. Annual fees under the Plan, which include a 0.25% service fee, total 0.50%, 0.52% and 0.47% of the average daily net assets of the SwissKey Class of the U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond Fund, respectively. - -------------------------------------------------------------------------------- 36 THE SWISSKEY FUNDS -- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 6.CAPITAL TRANSACTIONS Capital stock transactions were as follows:
U.S. BALANCED FUND --------------------------------------------- YEAR ENDED PERIOD ENDED JUNE 30, 1996 JUNE 30, 1995 --------------------- ----------------------- SHARES VALUE SHARES VALUE --------- ----------- ---------- ------------ Sales: Brinson Class................... 6,944,846 $80,934,038 15,121,050 $154,231,504 SwissKey Class.................. 67,290 776,395 -- -- --------- ----------- ---------- ------------ Total Sales................... 7,012,136 $81,710,433 15,121,050 $154,231,504 ========= =========== ========== ============ Dividend Reinvestment: Brinson Class................... 1,540,774 $17,588,758 178,265 $ 1,991,226 SwissKey Class.................. 422 4,850 -- -- --------- ----------- ---------- ------------ Total Dividend Reinvestment... 1,541,196 $17,593,608 178,265 $ 1,991,226 ========= =========== ========== ============ Redemptions: Brinson Class................... 3,073,501 $36,019,481 1,260,181 $ 13,268,940 SwissKey Class.................. 957 10,963 -- -- --------- ----------- ---------- ------------ Total Redemptions............. 3,074,458 $36,030,444 1,260,181 $ 13,268,940 ========= =========== ========== ============ U.S. EQUITY FUND --------------------------------------------- YEAR ENDED YEAR ENDED JUNE 30, 1996 JUNE 30, 1995 --------------------- ----------------------- SHARES VALUE SHARES VALUE --------- ----------- ---------- ------------ Sales: Brinson Class................... 5,125,613 $66,685,850 3,011,049 $ 30,972,427 SwissKey Class.................. 375,655 5,290,955 -- -- --------- ----------- ---------- ------------ Total Sales................... 5,501,268 $71,976,805 3,011,049 $ 30,972,427 ========= =========== ========== ============ Dividend Reinvestment: Brinson Class................... 222,497 $ 2,935,334 33,507 $ 349,100 SwissKey Class.................. 644 8,938 -- -- --------- ----------- ---------- ------------ Total Dividend Reinvestment... 223,141 $ 2,944,272 33,507 $ 349,100 ========= =========== ========== ============ Redemptions: Brinson Class................... 380,602 $ 5,174,675 202,160 $ 2,050,830 SwissKey Class.................. 6,874 90,042 -- -- --------- ----------- ---------- ------------ Total Redemptions............. 387,476 $ 5,264,717 202,160 $ 2,050,830 ========= =========== ========== ============ U.S. BOND FUND --------------------- PERIOD ENDED JUNE 30, 1996 --------------------- SHARES VALUE --------- ----------- Sales: Brinson Class................... 953,454 $ 9,550,552 SwissKey Class.................. 63,717 649,479 --------- ----------- Total Sales................... 1,017,171 $10,200,031 ========= =========== Dividend Reinvestment: Brinson Class................... 37,309 $ 373,407 SwissKey Class.................. 1,362 13,400 --------- ----------- Total Dividend Reinvestment... 38,671 $ 386,807 ========= =========== Redemptions: Brinson Class................... 84,593 $ 856,547 SwissKey Class.................. 1,055 10,884 --------- ----------- Total Redemptions............. 85,648 $ 867,431 ========= ===========
- -------------------------------------------------------------------------------- 37 REPORT OF INDEPENDENT AUDITORS - -------------------------------------------------------------------------------- The Board of Trustees and Shareholders The Brinson Funds -- U.S. Balanced Fund U.S. Equity Fund U.S. Bond Fund We have audited the accompanying statements of assets and liabilities, including the schedule of investments, of The Brinson Funds--U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond Fund as of June 30, 1996, the related statements of operations and changes in net assets and the financial highlights for the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of June 30, 1996, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The Brinson Funds--U.S. Balanced Fund, U.S. Equity Fund and U.S. Bond Fund at June 30, 1996, the results of their operations and the changes in their net assets and the financial highlights for the periods indicated therein, in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP ERNST & YOUNG LLP Chicago, Illinois August 9, 1996 - -------------------------------------------------------------------------------- 38 SPECIAL MEETING OF SHAREHOLDERS - -------------------------------------------------------------------------------- A Special Meeting of Shareholders was held on February 16, 1996. At the meeting, shareholders of the Funds were asked to consider and act upon amendments to the Trust's fundamental investment policies to (1) permit each Fund to invest in affiliated investment companies; and (2) permit each Fund to enter into forward foreign currency transactions for non-hedging purposes. The results of all matters voted on by shareholders of the Funds at the Special Meeting held on February 16, 1996, were as follows: A.AMENDMENT TO THE TRUST'S FUNDAMENTAL INVESTMENT POLICIES TO PERMIT EACH FUND TO INVEST IN AFFILIATED INVESTMENT COMPANIES:
FOR AGAINST ABSTAIN ---------- --------- ---------- U. S. Balanced Fund ............................ 14,907,986 -0- -0- U. S. Equity Fund............................... 5,340,548 -0- -0- U. S. Bond Fund................................. 880,287 -0- -0- B.AMENDMENT TO THE TRUST'S FUNDAMENTAL INVESTMENT POLICIES TO PERMIT EACH FUND TO ENTER INTO FORWARD FOREIGN CURRENCY TRANSACTIONS FOR NON-HEDGING PURPOSES: FOR AGAINST ABSTAIN ---------- --------- ---------- U. S. Balanced Fund............................. 1,006,826 -0- 13,901,160 U. S. Equity Fund............................... 4,225,480 1,115,068 -0- U. S. Bond Fund................................. 880,287 -0- -0-
- -------------------------------------------------------------------------------- 39 DISTRIBUTED BY: FUND/PLAN BROKER SERVICES, INC. 2 W. ELM STREET CONSHOHOCKEN, PA 19428 This report is submitted for the general information of the shareholders of the Funds. It is not authorized for distribution to prospective investors in the Funds unless preceded or accompanied by an effective Prospectus which includes details regarding the Funds' objectives, policies, expenses and other information. - -------------------------------------------------------------------------------- LOGO 10 East 50th Street, New York, New York 10022 . Tel: (800) SWISSKEY -----END PRIVACY-ENHANCED MESSAGE-----